Precious metals are a strong investment option because they have value of their own that doesn’t depend on the strength of any fiat currency or on the stability of the financial system. Gold and silver in particular have been used as currency and to store wealth for thousands of years. Today, you can still buy gold and silver bars and coins as investment vehicles, but these faithful standbys have been joined by the precious metals palladium and platinum. Is investing in one or more of these metals the right choice for you?
If you want to protect your portfolio from inflation and market volatility, and want a store of wealth that isn’t beholden to the financial system, then physical bullion is for you. If you want to invest on a long timeline, then physical bullion could be the right choice. If you want to diversify your portfolio with an asset that can pay dividends and offer some protection from market volatility and a hedge against inflation, then investment products like stocks and funds in the precious metals sector might be a better choice.
When to Buy Actual Precious Metals
Buying gold and silver rounds (coins) and bars is the most direct way to invest in precious metals. You can also buy palladium and platinum bullion, but most new investors in precious metals start out with gold or silver because it is familiar to them, and because these metals’ long histories lend them some stability.
You should buy physical bullion if you’re prepared to cope with the drawbacks of investing in physical metal. For one thing, you have to store it somewhere. That’s usually in a depository, where they can keep the chain of custody for your metals intact. That will make them easier to sell – a complete chain of custody reassures buyers that your metal isn’t counterfeit.
However, a depository isn’t the only storage option. You can store your precious metals at home in a vault or safe (or in a hole in your backyard – just make sure you remember where to dig). You can put your precious metals in a safe deposit box near your home. But the safest place by far is in a depository, and the cost of storing precious metals can add up quickly and eat into any profits you might realize one day.
The price of silver, palladium, and platinum can be more volatile than that of gold, because these metals have more industrial applications. The spot prices of palladium, silver, and platinum will respond to changes in the industries that use these metals. The price of gold is more stable because most of the demand for gold comes from investors. However, all of the precious metals will go up in value over a long enough time period. Buy physical metals if you have a long time horizon for your investment.
If you want to realize short-term gains, then physical bullion may not be the right choice for you, although an experienced or lucky investor can realize short-term gains if they pay close attention to the spot prices of silver, platinum, and palladium. However, you may struggle to find a buyer for your precious metals, or at least one that wants to pay you market price. Buy your bullion or rounds from an online dealer with a buyback policy so you can easily cash them in.
When to Buy Precious Metals Stocks and Funds
Buying physical bullion may not be the right move for many investors. It’s expensive to store them and they can be hard to sell. Bars and coins made of precious metals can be stolen from your home. They don’t pay any interest or dividends while you own them – the entire payoff comes when you sell the metals. So unless you’re prepping for a societal collapse that will render paper money useless, it may not make financial sense for you to buy physical bullion.
Investment products can give you precious metals exposure while still letting you enjoy the benefits of owning stocks or mutual funds. Stocks in mining companies like Wheaton Precious Metals (WPM) or SSR Mining Inc (SSRM) are a popular way to get some exposure to precious metals, but you should carefully assess any mining or streaming stock before buying it. You can lose money on them the same as you would any other stock, and they may not provide much of a hedge against inflation because their value is so closely tied to economic and industrial activity.
Mutual funds and exchange-traded funds (ETFs) are usually the safer bet. Precious metals mutual funds may either hold stocks in mining and streaming companies, or they may hold stockpiles of actual bullion, or a mix of both. ETFs track the spot price of precious metals. Either is a good choice if you want to practice dollar-cost averaging as an investment strategy.
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Are you wondering whether precious metals are the right investment for you? These valuable commodities can protect your wealth and purchasing power over a long timeline, and give you the chance to safeguard some of your wealth outside of the financial system. With many investment options to choose from, you could start investing in precious metals today.
