Are you interested in investing in precious metals? Investing in gold, investing in silver, investing in platinum—these are all things that you can do.
In premise, when most people think of investing in precious metals, they imagine a bridge troll who is hoarding a bunch of gold coins in his lair. But that’s not the case.
In this article, we will cover the real way to invest in precious metals, as well as provide a bit more depth to the three most common metals.
So if you’d like to invest and avoid looking like a troll, keep reading.
Let’s start with the basics: gold. Gold is very unique, it does not corrode or rust. It’s known for its malleability and durability, as well as the ability to conduct electricity and heat.
It has industrial applications and is pretty much everywhere. We also know it as the base element for most jewelry, and in some cases, as a form of currency.
The value of gold is changing seven days a week, 24 hours a day. Gold trade is less affected by the laws of demand and supply. This is because the newly mined gold is always outweighed by the present gold that has already been mined.
To elaborate, when hoarders feel like they want to sell their hold, the price is dropping. When they choose to buy hold, the supply is absorbed and the price of gold rises.
Some specific factors might contribute to increased interested in investing in gold:
- When economical and political stability is questioned, gold is sought for the stability of monetary value
- War upheaval will send people into gold hoarding, lifetime savings can be stored in metal until needed for trade
- When equity, real estate, and bond markets are negative, people flock to invest in gold as an asset to retain value
And that’s about it for our shine yellow friend. Let’s continue with silver.
Unlike gold, silver pricing changes based on its role in industrial application and the perceived role of it as value storage. For this reason, the silver market is significantly more volatile.
While silver trades similarly to gold in terms of hoarding, the demand/supply equation in industrial applications exerts a stronger influence on its price. This fluctuation occurs in line with new advancements, such as:
- The importance of silver in photography, being used as an important material for the film
- The use of silver in superconductors, batteries, and microcircuits
- The growth of middle-class electrical needs in the East, from bearings to electrical circuits
It’s unclear to what extent these advancements will affect non-investment silver. But one thing remains, it’s that silver price is affected by an application, and not by storage of value and fashion.
Let’s take a platinum look.
Like silver and gold, platinum is traded every day. It often has a higher price per troy ounce, especially during periods of market stability. Far less of the metal is mined, thus it is rarer and more valuable.
Some of the factors that affect the price of platinum are:
- Platinum mines are concentrated in Russia and South Africa, this creates a monopolized behavior of artificial price changes
- Platinum is heavily used in the auto industry and was an important part of catalytic converters until companies opted-in making use of recycled parts or palladium
- Platinum is industrial, but it also has lots of value in jewelry, shortly followed by chemical refining and petroleum, as well as a computer tech
Investors have to consider these factors to ensure that platinum is a worthwhile trade, considering platinum is the most volatile of the three metals.
Let’s take a look at actually investing in precious metals.
Investing In Precious Metals: Exchange Traded Funds
Exchange-traded funds exist for all of the metals. These ETS are liquid and convenient for buying and selling silver, gold, or platinum.
Investing in them does not provide physical access to the metals, so you don’t have a material claim over them. You will not actually receive a coin or bar, but you will play the market change to see if you can benefit from it.
Mutual Funds & Stocks
Shares of metal miner companies are bound to the price alterations of precious metals. Unless you know how mining stocks are evaluated, it might be better to stick to funds that have managers with a solid track record.
Options & Futures
The options and futures markets provide leverage and liquidity to investors who like making big bets on precious metals. The best losses and profits are subject to occurrence with these derivatives.
Bars and coins (read more) are for those who like to keep their investments in a safe or deposit box. For those who are expecting the worst of the worst, bullion is the only option. However, for those who have lots of time, bullion is bothersome and illiquid.
Certificates provide investors with all of the advantages of physical ownership with the need for storage or transportation. If you’re looking for real disaster insurance, certifications are paper and nothing else.
So don’t expect anybody to trade something for something to wipe their bottom in a crisis.
Now that you have finally discovered the world of investing in precious metals, you can finally decide if you’d like to try it out. Whatever you choose to do, it will be the right thing to do at that moment.
If you’re planning for disaster, go with something tangible. If you have time on your side, play the long game. For similar content, feel free to check out the articles on the sidebar or our business filtered categories.
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