Investing in Gold and Precious Metals – Key Takeaways

Physical gold and other precious metals have been a part of our history for thousands of years. Wars have been fought over the possession of gold and silver and this has shaped our way of life as we see it today.

Even now, after so many years since the first gold mines were dug in Ancient Egypt, gold bullion is still as important as it was back then.

What is it about gold that makes humans do whatever it takes to have it? What dictates gold prices? Are precious metals investments better than mutual funds?

These questions and more will be answered in this article, as we look at the four most important precious metals, gold, silver, platinum, and palladium.

Key Takeaways

Investing in gold and precious metals
  • Gold is the precious metal of choice for most investors, but there are other precious metals worth considering

  • Besides buying physical gold, investors can also explore other alternatives, such as investing in gold mining companies or buying gold ETFs

  • Silver, platinum, and palladium are great choices you a diverse precious metals IRA

  • Precious metals provide a hedge against inflation

The Four Important Physical Precious Metals

Precious metal investing covers a very wide range of metals other than gold and silver coins, which is one of the things that many investors love about this type of investment portfolio.

The opportunities to diversify are many, and as long as you have the funds, there are always some new physical metals to try out.

However, for the most part, four types of metals are usually preferred above all others, and these are gold, silver, platinum, and palladium.

If you are new to precious metals investing, you will likely end up buying one of these physical metals for your portfolio. We will now take a look at what makes these precious metals more popular than the rest.

Gold

Ever since King Croesus minted the first physical gold coins in 650 BC, gold has been the undisputed king of all precious metals.

What makes this even more surprising is that there are other precious metals, such as Rhodium and platinum that are considered more valuable than gold, yet no other physical metal can match gold in terms of demand.

Yes, gold does have a lot of industrial uses in technology and medicine due to its unique characteristics, such as its low reactivity, ability to conduct electricity, and rust resistance. However, it is its use in jewelry, and as a major currency that makes gold so special.

The gold price is forever changing, 24 hours a day, seven days a week according to how and when those who have large amounts of gold are willing to sell. No matter how fast gold miners work, they can never outpace the huge demand for this precious metal.

Take a look at countries such as Russia and China that have dedicated billions of dollars to buy gold even though they already have some of the world’s largest reserves of gold. This is one of the most telling signs of the value of gold and why it is a worthy consideration for investors.

What is also great about gold prices is their resilience against changes in the global economy. When one has gold, they do not worry about inflation and market fluctuations. Gold will perform at its best during difficult periods such as the one we are facing.

–> View the Best Places to Buy Physical Gold

Silver

The true value of silver is often understated, mainly because of the constant comparison between gold and silver prices. However, among the top four physical precious metals, you can own, silver is the most accessible and affordable option.

One of the major differences between gold and silver is that silver prices are more affected by its industrial uses than by its use as a store of wealth. In this regard, silver has a lot of uses, such as:

  • In medicine as an antibacterial agent

  • Silver is used in the manufacture of solar panels

  • It is one of the key components in making photographs

  • Silver is one of the most popular jewelry precious metals

  • It is a great way to store wealth

  • Silver is essential in the manufacture of batteries, superconductors, and other microelectronics

If you as an investor are looking for a cheaper option than gold that will provide the same, if not more, return on investment, silver is a great option.

–> Learn about the Silver Backed IRA

Platinum

Platinum

While it lags far behind gold and silver in terms of demand and industrial applications, platinum is a very valuable precious metal that is seeing a growing demand in fast-growing economies, such as China.

Platinum is traded around the clock as a precious commodity and it fetches a much higher price per ounce than gold and silver because it is a very rare physical metal. The following are some of the factors that determine the value of platinum as an investment option:

  • It has a lot of industrial applications, especially in the automotive industry where it is essential to the manufacture of platinum convertors

  • Platinum jewelry, although very expensive, is quite popular among the elite, especially in the rapidly growing male jewelry industry

  • It is a very rare metal that is highly affected by economic and political developments in the countries where it is mined

  • Most of the world’s platinum reserves are concentrated in South Africa and Russia, which gives these countries a lot of power when it comes to determining the price of platinum.

These factors mean that platinum is not only dependent on global demand and is therefore a lot more volatile than other precious metals.

While this increases the risk of investing in platinum, it also means that if you are looking for an investment option that has the potential to make a huge profit in a short space of time, platinum is a great choice.

Palladium

Palladium

Of these four popular precious metals, perhaps the least known is palladium. However, surprisingly, palladium has a lot more industrial uses than its counterparts.

This robust and shiny metal is widely used in various industries, such as medicine, chemistry, dentistry, water treatment, electronics, and, more recently, jewelry.

The world’s palladium reserves are spread in seven countries, which are Zimbabwe, South Africa, the USA, Russia, Finland, Canada, and Australia. This makes palladium a lot more widespread than platinum and a lot more resistant to geopolitical manipulation.

Palladium was first used in jewelry manufacturing back in 1939 when it was discovered that when alloyed with yellow gold it produced a very strong metal. Tonga was the first government to approve the minting of palladium coins and other nations soon followed.

While pure palladium is highly malleable, it is strongest when used t room temperature, where it can be made into some of the thinnest sheets possible. Some of its greatest applications are in the manufacture of fuel cells and solar panels.

Palladium is at least 12% stronger than platinum, and because the two share a lot of similar properties, it has also found us in the automotive industry where it is used to create a stronger form of the catalytic converter.

How To Invest in Gold and Other Precious Metals

When you finally decide to step away from paper assets such as mutual funds, stocks, and bonds, one of the first things you will realize is that there are many ways to invest in precious metals.

It is not just a matter of finding a precious metals dealer, buying your metals, and keeping them somewhere safe. Depending on your budget, circumstances, and long-term goals, you should carefully consider all the different investment opportunities, such as:

Buy Precious Metals

Precious metals, such as gold and silver, are readily available on the open market where precious metal dealers will sell them to you at the day’s spot price. Buying and storing physical precious metals is one of the easiest ways to invest in gold and silver.

Gold coins and bullion can be bought and stored indefinitely in a safe depository as a hedge against inflation, where they can be retrieved and easily sold when access to funds is required.

While this is a very popular way to invest in precious metals, if one is not familiar with bullion it is easy to be scammed but unscrupulous dealers, which is a big problem in the industry.

It is also quite difficult to transport and store large amounts of precious metals due to the constant risk of theft. This is why it might be prudent to look to other ways to invest in precious metals.

Invest in Gold Mining Stocks

As the demand for precious metals continues to grow much faster than the supply, the value of mines around the world will increase.

One of the best ways to invest in gold without ever having to buy and hold physical precious metals is to invest in mining companies.

Chosen well, gold stocks can give investors a large ROI which will continue to grow as the precious metals become rarer.

However, one important thing to note is that mines are very vulnerable to geopolitical manipulation, and their value is often overshadowed by the political clashes that accompany all world regions where precious metals are readily available.

Open Gold IRAs

People who already have a large investment in paper asset classes, such as mutual funds, often seek to diversify their portfolios by opening a gold individual retirement account (gold IRA).

This type of account is a safe-haven investment portfolio that is immune from inflation and other problems in the global economy, such as stock market volatility.

To invest in precious metals in this way, you simply have to open a gold IRA account with an IRS-approved custodian and start buying precious metals.

However, the precious metals have t be IRS-approved, meaning if it is bullion it must meet certain standards of purity, such as 99.5% for gold and 99.9% for silver. Coins have to be from approved mintages, such as the Royal Canadian Mint.

Another important factor is that you will not be allowed to hold or keep your precious metals as these can only be stored by an IRS-approved depository.

Gold Exchange Traded Funds (ETFs)

Trading in gold exchange-traded funds (ETFs) is another popular way to make money from gold without ever having to lay hands on it.

Gold and other precious metals are listed as commodities of the open market. Based on the spot spice, you can buy gold for a certain amount and sell it t a later date for a higher price, thus making a profit.

Usually, gold prices are constantly changing and if you can read the industry well and come up with a winning strategy, there is a possibility to make a huge profit from trading gold ETFs.

Is Precious Metals Investing a Good Idea?

Depending on the strategy you employ, there is a lot of potential to make money by investing in gold and silver. Whether you choose to buy actual gold or trade in precious metal ETFs, you can never g wrong with securing your funds using precious metals.

In terms of investing in precious metals in the current economy, it can be the best choice due to the negative correlation between the global economy and the demand for precious metals. In other words, as things continue to get worse, the value of precious metals will increase.

Risks of Investing in Gold and Silver

No investment option is completely immune from risks, even a solid investment, such as buying gold and silver.

Before you decide to become a precious metals investor, you should know that the industry is dominated by a lot of untrustworthy gold dealers that will try to scam you of your hard-earned money.

There are also geopolitical issues and changes in supply and demand that will affect the day-to-day spot price of gold and other precious metals, which is important if you intend on trading in mining stocks or gold ETFs on the online markets.

Final Word

If you are thinking of becoming precious metals investor, you are on the right track towards financial freedom. The first things you need to do are gain exposure and learn as much as you can about precious metals.

After that, you can speak to your financial advisor about the best investment options for you and from there, the sky is the limit!

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