Precious Metals Investing: What To Know

Precious Metals Investing: What To Know 5.00/5 (100.00%) 2 votes

In recent years, precious metals investing has made the leap from a niche investment mechanism to a mainstream tool used by a large number of average investors. That’s largely because precious metals provide an opportunity to significantly diversify a new or existing investment portfolio, giving a it a bit of “stored value” that can be used to hedge against riskier investment or a broader decline in a given stock market index. Despite its transition into mainstream investment theory around the world, though, the basics of precious metals investing remain a mystery to many consumers.

As with all investments, the only way to maximize a portfolio consisting of precious metals is to thoroughly understand the marketplace and the nature of each metal’s performance on world markets. By understanding how to make a strong and intelligent entry into precious metals investing, consumers will be able to extract the largest amount of value overall. Getting started with this knowledge is easy, and it all starts with a simple question: Where do consumers go to start investing in these metals?

Trustworthy Dealers and Precious Metals Companies: The Smart Way In

Though investing in precious metals involves tying the value of that investment to something a bit unconventional, consumers will find that getting started with these investments is actually done in a pretty conventional way. Today, many online investment houses and offline brokers regularly deal in gold, silver, and platinum, giving consumers a trustworthy way to buy everything from bullion and certificates to stocks and futures that are all rooted in this trifecta of valuable metals.

From sites like Monex.com to offline investment locations nationwide, consumers should make sure that they deal with companies who can show proof of industry certification, customer satisfaction, and investor expertise. This will allow for expert consultation and investment that is best designed to exhibit long-term growth and a lifelong increase in overall value across the board.

What to Buy: How Each Precious Metal Stacks Up as a Source of Investment Income

Though platinum, gold, and silver are all considered “precious” metals, each of these metals performs differently when used to drive the value of an investment portfolio. That’s because each metal is used in different applications, has a different degree of overall rarity, and is in demand by different types of consumer, different companies, and different world governments. Investing smartly means finding the metal that offers the right long-term promises, the best short-term gains, and the proper amount of industry use and scrutiny for long-term success.

Silver: The Middle-of-the-Road Precious Metal

For those consumers who aren’t well versed in precious metals and their applications in various industries, it might be hard to distinguish between silver, gold, and platinum. Each of these metals differs in key ways, however. Silver is widely appreciated as an ingredient in fine and expensive jewelry, but its most common uses are actually behind the scenes, used to power emerging economies and industrial equipment around the world.

In fact, the single largest use of silver in today’s economy is creating electrical and industrial equipment that is used in emerging industrial economies, like those in China, India, and several other Southeast Asian and even African countries. This puts a great deal of demand on silver as those countries develop, but it means that any value derived from that demand is largely temporary.

A further component adding to the volatility of silver is that, in a relative sense, it’s not particularly rare. Indeed, platinum is quite a bit more rare and thus holds its value better than almost all silver investment. Despite this lack of rarity, though, silver still functions as a stored value investment that can diversify a precious metals portfolio and give it the potential for dynamic growth during certain periods. Furthermore, silver is beginning to make the transition to more of a stored value investment as consumers around the world view it as a smart diversification tool rather than just an industrial metal.

Platinum: Industrial Metal with Investment Promise

More than any other precious metal, platinum is widely appreciated as an “industrial” metal. For years, platinum has actually been used to automakers to create better emissions systems, reducing the amount of carbon that is released into the air by today’s late model vehicles. The metal is also used to refine a large number of chemicals, and many Middle Eastern countries employ platinum to refine petroleum and convert it into the gasoline that today powers the vast majority of vehicles around the world.

To that end, the value of platinum hinges largely on the performance of the auto industry. While the metal also finds its way into expensive, high-end jewelry sales, it derives the vast majority of its value from the auto industry and worldwide demand for new vehicles. Its value can also rise when any major world government indicates an increased standard for vehicle emissions cleanliness.

In addition to its vast industrial and automotive uses, platinum is among the most rare metals in the world. Currently, almost all platinum being used and traded comes from either Russia or South Africa, and both countries operate only a handful of productive platinum mines. This relative scarcity helps platinum function as a stored value investment even while it is most useful as an industrial component. This stands in stark contrast to silver, which is far less scarce and therefore a great deal more volatile as an investment.

Gold: The Closes Thing to a Sure Bet for Investors

The performance of gold as a stored value investment is well known, but it’s worth noting that it has also defied almost every expectation set by traditional investors. For years, people have been predicting that gold has reached its peak or exceeded its value, but those predications have been wrong in virtually every case. That’s because gold offers something that no other investment today really seems to bring to the table: The idea of stored value in a metal that is relatively untainted by industrial use and tends to increase in value as stock markets decline.

In an era marked largely be recession and uncertain market fortunes, gold has picked up the slack. Though its relationship with stock market declines is certainly non-correlational, there’s no denying that the metal has benefitted from the rough seas of the traditional stock market. Furthermore, its uses in everything from medical equipment to electrical equipment are on a rather even keel, easy for investors to predict and compensate for.

How it’s Done: A Look at the Types of Gold Investments

Investing in precious metals might seem like the monetary equivalent of a foreign language to those who are new to the industry, but the truth is that many people invest in gold, silver, or platinum, but using well-known investment tools like stocks or bonds. Even those investors who prefer a more literal approach to investing typically buy bars or coins to build their portfolio. That’s hardly foreign to most Americans, at least in theory. For those wondering how these investments are made, there are generally a few types to be aware of.

1. Bullion and Certificates

Buying actual bullion requires the investor to have a safe where bars or coins can be stored, while purchasing certificates gives the investor a way to claim remote stores of bars or coins. These two methods are considered “literal” investments, and they’re the best source of stored value for those who want hands-on access to their money at all times.

2. Exchange Traded Funds

Commodity ETFs are a liquid investment that allows for real-time trading of gold, platinum, and silver. This method will be instantly familiar to those who have other ETFs already in active use as part of their portfolio.

3. Stocks, Mutual Funds, Options, and Futures

More advanced precious metals trading can be tied to stocks and mutual funds, as well as options and even futures. These more advanced tools are a great way to increase the amount of risk associated with an investment portfolio, with the obvious benefit of potentially much larger financial gains over time.

A Strong Market for New Investors

Precious metals have defied all expectations in recent years, increasing in value as the broader stock market has struggled to maintain momentum. Investors who are looking to hedge their bets, lower risk, and cultivate a great deal of stored value, will be delighted at just how well they’re served by this diverse and exciting way to invest.