A Guide to Investing in Precious Metal

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Although crude oil dominates the world’s trade market today, investing in precious metals is also a profit-making choice an investor should make. For many years, there has been a growing demand for metals investment. Especially in 2021, demand for Gold, one of these precious metals has soared, making many investors consider adding it to their portfolio.

New investors may wonder which of these metals is more profitable than the other or which options for investment are available. You can find a precious metals dealer who will help you with this decision. But it is always good to have an idea of what it involves. 

What is Precious Metals Investment?

This is different from bonds or stocks. Precious metals are commodities, meaning that you can buy and sell them. Commodities in this sense include:

  • Copper
  • Gold
  • Palladium
  • Coffee
  • Oil

Commodities are not included in stock trading, so you can invest even when there is economic instability. A weak dollar causes an increase in the prices of commodities such as Gold. During the COVID-19 pandemic, there were serious fluctuations in the stock market. But precious metal was stable and experiencing profits. Surely, even as a beginner investor, it is wise to have these metals in your portfolio.

What Precious Metals Are

Precious metals are natural, rare metals of great economic importance. In early times, they were only currencies but now, they can be investments and commodities. Examples include:

  • Gold
  • Silver
  • Copper
  • Palladium
  • Platinum

Which is the Best for Investment?

The demand in the market, price volatility, and pricing greatly affects whichever metal you have an interest in. Let’s discuss how these factors can affect the five metals mentioned above.

Gold

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This is a precious item that has many practical applications. It has unique properties which include the following:

  • It is durable as it hardly corrodes or rust.
  • It is malleable. You can shape it into different forms without cracking it.
  • It conducts electricity and heat.

Gold has application in electronics and dentistry (in tooth fillings). It is a popular jewelry item, and in history, it served as a currency. 

Its value and price in the investment market hardly gets affected by demand or supply laws. So hoarding gold and selling it later may not increase the price significantly as expected by supply laws. There are several reasons why many investors still choose to hoard this precious metal. 

Financial concerns – Due to money instability, people sought gold storage as a form of value.

Political uprising – When countries are at war or there are political uprisings, people buy gold and hoard it till they need it for trading during those dangerous times. 

Inflation – When bonds and stock market returns are minuses, investors fall back on gold for its value stability. You can visit https://money.usnews.com/investing/investing-101/slideshows/things-to-know-before-you-invest-in-gold to learn more about investing in gold.

Silver

This is much more affordable than Gold. Its pricing fluctuations are volatile, and it depends greatly on the application. Applications for silver are similar to that of Gold. It has a role in photographic film making, batteries, and circuitry units.

Copper

This is the 3rd most popular precious metal used by many, but due to its lack of luster or shine, investors overlook it. It is not expensive; therefore, as a beginner, you can choose to add it to your portfolio. There will be a growing need for copper as many countries have an increase in industrial works. As a result, the prices of copper will rise in the near future.

Palladium

This precious metal is rare, so it is the most expensive right now. It has a wide industrial application which includes the following:

  • Catalytic converters
  • Dentistry
  • Electronics and circuitry
  • As jewelry
  • In groundwater treatment
  • In chemical reaction

Stealing of this rare gem is common in many countries. Since the supply is low compared to its demand, palladium price will remain high for a long time. As a result, average investors rarely have it in their portfolios.

Platinum

This is also a rare metal and expensive too. Its mining takes place in Southern Africa and due to the lockdown, supply has been poor. It has many applications from jewelry making to dental works, and as catalytic converters. It is more price volatile than other precious metals.

Common Options in Precious Metals Investing

To have these metals in your portfolio, here are some options available to you:

Exchange Trade Funds

The ETFs are convenient means to buy and sell precious metals like platinum, silver, and gold. 

Pros

  • There is an ease in buying and selling.
  • It is a liquid means of trade.
  • The money for investment is flexible.

Cons

  • There is no physical commodity.

Future and Options

This market offers an opportunity for investors that want to place bets on precious metals.

Pros

  • There are potentials to have big gains.

Cons

  • It could lead to great financial loss.
  • It is volatile.
  • One would need to carry out extensive research to make profits from this investment.

Bullions

This is a physical, raw asset. It could be in bars or coins.

Pros

  • Great for those that like physical asset.
  • You can buy it at any price.
  • There is easy transporting of assets.

Cons

  • You should have storage space before considering this option.
  • It can be bothersome for many.

Are you interested in Bullions? You can click here to learn more about Bullion investing.

Conclusion

Precious metals are useful means of creating a diversified portfolio for investors. To be successful in this type of investment, it is important to set the right goals, know the risks involved, and then you can jump into it. Keep in mind that although this investment leads to great wealth, if unchecked, it leads to great financial loss.

Here is more about Investing in Precious Metal:

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