The best precious metals to invest in have a high demand and supply, and the most common are gold, silver, platinum, palladium, and copper.
If you want to learn more about each precious metal, we’re breaking down everything you need to know about including these in your investment strategy.
What Are Precious Metals?
Precious metals like gold have been mined for a long time and usually maintain a high value.
They are typically associated with gold jewelry, coins, and other value items.
However, people buy precious metals such as gold and silver for various reasons.
For one, investors might see these metals as an investment in the future that will survive economic downturns and volatile markets.
So some people might want to buy precious metal because it’s a way to store their money in a safe place that will not lose its worth over time.
Central Banks Control the Supply of Precious Metal, Including Gold and Silver
The central banks of various countries control the supply of precious metals, and they are also in charge of regulating the amount of money in circulation and the interest rates of different countries.
As a result, these central banks can also control the amount of available gold and silver in circulation.
So when central banks release more currency into circulation, this causes inflation which drives prices up, which leads to higher prices for precious metals.
Fortunately, gold and silver are usually considered safe investments.
These two metals have fared well historically compared to other investments like stocks or bonds, which fluctuate because their value is tied to what people think about them.
Why Invest in Precious Metals?
Precious metals are a vital component of an economy.
They are a significant contributor to the world’s economies and have been so for centuries.
Precious metals have influenced the cultures of many societies worldwide.
The precious metal market has seen significant growth in the last few years, with silver rising sharply in value.
Prices and demand for gold and silver, platinum, and copper have all increased at much higher rates than inflation.
Gold prices have increased by over 60% since 2011, with silver having risen from $20 an ounce to $50 over this period.
The Main Reason for Investing in Precious Metals
Investing in precious metals is one way you can hedge against inflation, diversify your portfolio against geopolitical risk, or make some money from increasing prices of gold and silver on the markets.
Precious Metals to Invest In
There are five primary precious metals worth investing in, which includes:
- Gold
- Silver
- Platinum
- Palladium
- Copper
Keep reading to learn more about each precious metal.
Gold
Gold is the most valuable of all metals and has always been an essential part of the world’s economy.
This precious metal has been used as a form of money for centuries, and it’s still used today.
One reason that gold is such a precious metal is its rarity and beauty, and that’s why it has been used to form jewelry and decorations since ancient times.
More About Gold
Gold is scarce because there are not very many deposits to mine from, with most of them in South Africa.
But this also makes gold more attractive to investors because there are almost no other substitutes that are as good for investing in or trading with as gold is.
Gold can be found on Earth’s surface in different shapes and sizes, but they all have the same chemical composition — Au (Gold).
Some gold nuggets will be just a few ounces each, and some massive nuggets have been found in mines in South Africa.
Silver
Investing in silver is a great way to make some extra money.
This is because as the economy falters, more people will turn to silver for security.
Unlike gold, silver’s value is more susceptible to swings in the market because of its role as an investment asset and as an industrial metal.
Silver has been valued for centuries as a form of currency, and this tradition is unlikely to change any time soon.
In times of economic uncertainty, investors will often turn to precious metals such as silver and gold.
And when demand for silver rises, so does the price of the metal.
Similar to gold, silver can act as a hedge against a volatile market, inflation, and economic downturn.
Platinum and Palladium
Platinum and Palladium are rare metals that have many industrial purposes.
These metals are primarily used in the production of jewelry, electronics, and some automotive parts.
Platinum and palladium are used in the creation of catalytic converters.
Though, palladium is preferred by automakers because it costs less per ounce than platinum.
But palladium price has increased since late last year due to a decline in supply and an increase in global demand.
Palladium is one of the precious metals that can be considered an investment opportunity.
Palladium jewelry is becoming more popular, which increases the demand for palladium in this industry, and it also has many other industrial uses which drive up the price.
Copper
Copper is a metal that is necessary for most of the world’s population, as it’s used as a base material in many industries and improves the efficiency of several manufacturing processes.
Copper has been traded for more than 10,000 years, and it was one of the first metals to be mined.
Because copper can be found in ores containing other metals, it has always been valuable and sought after by people.
So when you invest in copper, you are investing in a vital metal that will always have a demand.
How to Invest in Precious Metals
Gold bars are one of the most popular ways to invest in precious metals.
They are priced at a fixed weight and are available in 1 ounce, 5 ounces, 10 ounces, 20 ounces, 50 ounces, 100 ounces, and 1-kilogram sizes.
Gold bars can be bought for as little as $1 over the spot price of gold.
The downside to investing in gold bars is that they can’t be exchanged for coins or other forms of currency easily without a merchant who deals with them regularly.
Gold coins are one of the easiest ways to invest in gold because they come with lower premiums over the spot price than gold bars do, and they can be easily exchanged for cash without any hassle from merchants.
Commodity Exchange Traded Funds (ETFs)
ETFs are a type of fund that holds investments such as stocks, bonds, or commodities.
Unlike mutual funds, ETFs trade on stock exchanges and can be bought and sold during the day.
ETFs are popular for several reasons:
- They offer exposure to different types of assets in one investment
- They cost less than buying individual securities
- Investors can easily buy and sell them during market hours
Common Stocks and Mutual Funds
The Stock market is the marketplace for trading company stocks, and it can also refer to a section of an exchange where traders can trade stocks.
Mutual funds are investment funds that pool the money from many investors to purchase items like stocks, bonds, and money-market securities.
Mutual funds provide diversification and professional management at a low cost compared to buying individual securities.
Futures and Options
One of the most popular ways to purchase precious metals is through futures and options.
These two methods can be used to protect, hedge, or speculate on the price of gold and silver.
There are several different types of futures and options contracts that can be made with a precious metals investment broker.
One way is a future – This type of contract commits a buyer to buy some quantity of the underlying precious metal like gold and silver at a particular time in the future for some fixed price.
Another type is an option contract – This type of contract allows the buyer to buy or sell an underlying commodity at some specified time in the future for some preset price.
Bullion
Investing in precious metals is a great way to hedge against inflation and protect assets.
Bullion is an easy way to own a tangible asset while also diversifying the portfolio.
You can invest in bullion by selling your coins to a dealer, or you can find a dealer that will buy bullion from you outright.
You can also purchase bullion from the mint itself if it has an online store or if it partners with other dealers.
Certificates
Precious metals are an excellent investment for people looking to diversify their portfolios, and the best way to invest in them is to buy certificates of ownership.
The Certificate has the same value as the metals — but without any additional cost or fees — and it’s also usually backed by insurance.
With a certificate, you can buy as little as one gram of gold or silver.
Certificates are ideal for someone who doesn’t want to go through the hassle of storing and safeguarding the metals themselves.
Are Precious Metals a Good Investment?
Precious metals are often seen as a long-term investment but should never be an investor’s only investment.
The crucial difference between gold and stocks is that the price of gold is independent of the economy.
This makes it a good investment during economic downturns.
Gold also has what some economists call “inherent inflation,” which means that its price of the metals will increase with increases in the cost of living, such as food and energy prices.
Furthermore, gold has always been considered stable and a safe haven in times of economic uncertainty or turmoil.
It was an attractive option for investors during the 2008 meltdown — even though precious metals prices were already high due to their limited supply and growing demand from China, India, and other developing countries.
Best Precious Metals to Invest in: Final Thoughts
Precious metals are an excellent investment because they’re a tangible asset that is easy to store.
There are many factors to consider when deciding on what precious metals to purchase.
For instance, the company’s fee structure, the liquidity of the metal, and how much you plan on investing.
Some precious metals work better for smaller investments, while other metals work best for larger ones.
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