Everything you need to know before you invest in the precious metals market.
Most people feel a lot more confident when they can invest in real and tangible assets. While the concept of investing in stock and shares can make some nervous, nearly everyone is intrigued by the idea of investing in precious metals.
The prices of precious metals tend to be a lot more stable and predictable than stocks, cryptocurrency, and other forms of investment. However, the rewards tend not to be so drastic.
They do offer a great chance for investors to diversify their portfolios - particularly if their portfolios are entirely made up of stocks of cryptocurrency.
When you think of investing in precious metals, you probably think about investing in silver or gold. For many hundreds of years, gold has been used by governments to anchor their currencies, this is why so many of us trust gold.
Today, we are going to talk you through everything you need to know about investing in precious metals and the precious metal market.
Most Popular Precious Metals to Invest In
When you talk to members of the public about investing in precious metals, most of their minds automatically jump to investing in gold. This is understandable, gold is one of the most stable investments in the world and one of the most popular types of precious metals to invest in.
However, there are a few more options out there.
Gold is the most popular type of precious metal to invest in. This is a metal that has been considered valuable by nearly every culture in the world for thousands of years.
There are two properties that make gold a really unique and interesting metal.
Firstly, gold does not corrode when exposed to the elements like other metals do, it does not rust either. It is also very malleable and is very good at conducting heat and electricity.
The other interesting thing about gold is that it has a very high value, despite having very few practical uses. It is used in dentistry and one or two forms of electronics - but to us, its main value comes when it is used in jewelry or as currency.
Because of its durability, we know that gold has been used in currency and jewelry for thousands of years now. We have found coins and necklaces that can be traced back to over 3000 years ago.
Gold will stay at a fairly stable price until one of the big gold buyers decides to sell their collection. However, this product is quickly bought up and the prices normally rise again by the end of the week.
When economies are unstable, the price of gold is normally stable or it can sometimes rise.
You will also notice that the price of gold will rise during times of war as gold is portable and retains its value even if you cross a border and enter a new country.
Silver is very different from gold because it has two very separate values.
Silver is valued both as a precious metal (one that can be used to make jewelry and other investment pieces) and as an industrial metal. These two values are often conflicting and can either drive the price of silver much higher or it can drop significantly.
Gold is a fairly stable market, in comparison, Silver is incredibly volatile.
If you are looking to make a quick profit from a precious metal then you should consider investing in Silver. Yes, prices do bottom out, but they inevitably rise as Silver has an industrial use.
As white gold has grown more popular in the world of jewelry over the last 100 years, the value of silver as jewelry has dropped. It no longer has the same kind of hoarding value as gold.
But it still retains its industrial value. Silver is one of the best conductors of electricity out there - and it is therefore used in many different types of electronics. It is also used to make knives, surgeons' tools, and make other practical tools.
Silver has a higher value in the Eastern markets than it does in the West. This is mostly due to the number of electronics that these two areas produce.
Platinum is one of the most valuable metals in the world - even more so than gold. Why? Well, simply because it is rarer. There is far less Platinum in circulation and it is mined less than both Gold and Silver.
Like Gold and Silver, Platinum is traded 24 hours a day on the Global Commodities market.
Platinum is used in many different industrial products, just like Silver, it is most notably used in automotive catalysts. These reduce the number of harmful emissions that cars, vans, and trucks put out into the atmosphere.
In 2009 a global law was passed that meant car manufacturers had to start using more automotive catalyst converters in each vehicle. This caused the price of Platinum to skyrocket.
Over the last few years, the industry has started recycling and reusing automotive catalyst converters. This caused the price of Platinum to begin to return to previous levels.
Many manufacturers have switched to using Palladium which is a metal with similar properties to Platinum but it is nowhere near as rare and is, therefore, a lot cheaper.
The majority of the world Platinum supply can be found in South Africa and Russia. Platinum is unlikely to lose its value as it is so rare. This would only happen if a new and very large source of the metal was found.
Platinum is also a popular material to have jewelry made out of because of its durability and its innate value. It looks similar to silver but has a slightly darker base color.
Palladium is the final metal we are going to talk about today. However, there are many more types of precious metals that you can invest in. Many of these metals are less valuable than the four that we have talked about today and their markets are more volatile.
Palladium is in the same metal family as Platinum - this is why they can be used interchangeably in some industrial products. However, it is far more abundant than Platinum and has many more uses.
Palladium can be used in both electrical and industrial projects, it can also be used in sewage projects. It also has medicinal properties and has many uses in the world of chemistry.
It is also a crucial element in making solar panels. Palladium can also be mixed with other metals (like gold) to make a stronger alloy.
The majority of the world's Palladium comes from Russia and South Africa, but there are also Palladium mines in Canada and the United States.
There is a large supply of Palladium and it is minded consistently - while the price of Palladium has been rising slowly over the past few years, do not expect any big spikes in prices over the next few years.
Best Ways to Invest in Precious Metals
Now that you know more about precious metals, their markets, and their uses - you are probably wondering what the best way to invest in them is.
The answer to that question will depend on the type of portfolio you are looking to build and how much money you want to invest in precious metals.
Physical Gold, Silver Coins, and Bullion
Let's start by talking about the most traditional way to invest in Silver and Gold - buying them physically.
Market experts typically refer to people who buy precious metals physically as "hoarders". This is not meant as an insult, it is more of an observation. When you buy physical precious metals, you take them out of circulation and you reduce the amount of product available.
In the short term, this will give the value of the precious metals a small boost. However, if you want to make a profit from physically buying Gold and Silver then you are going to want to hold onto your precious metal investments for a long time.
Particularly if you are buying Gold. The Silver market is more volatile and fast-moving.
There are two things that you should bear in mind when you are looking to invest in physical precious metals - the price and where you will store these items.
If you want to buy physical gold then you are going to need some cash to pay upfront with - probably a large amount of cash. If you don't have a large amount of collateral then you should look into the other options on this list.
Secondly, you will need to think about how you are going to store your physical Gold or Silver. If you only have a few small coins then you can hide this away in your home.
But if you start to buy more then you are going to have to pay someone else to look after it for you.
Precious Metals IRA
Some people choose to put their IRAs (retirement funds) in stocks, but if there is a financial crash then there is a good chance that they could lose all their money. Because of this many people choose to keep their money in a simple savings account.
But there has to be a better option than just having your money sit around and collect dust? Well, we think there is - investing in a Precious Metals IRA.
What makes a Precious Metals IRA different from typical IRAs? Well a Precious Metals IRA is a form of self-directed individual retirement account. Because the account is self-directed, you have more control over what you invest in and the kind of investments you make.
A traditional IRA would only allow you to invest in traditional areas of the market like stocks and bonds. However, you can use a Self-Directed IRA to invest in things like Cryptocurrency and Precious Metals.
With this type of account, you can enjoy a much more diverse portfolio, and many experts believe that having precious metals in your portfolio will make the portfolio more secure overall.
The precious metals market is a lot less volatile than most other types of market and it can offer more protection for your money. It is recommended that you put around 10% of your portfolio funds into the precious metals market.
Gold and Silver, Stocks, ETFs & Options
If you are looking for a quick and easy way to invest in precious metals that will allow you to keep your assets liquid and sell them quickly if you need to - then you should look into ETFs.
ETFs stand for exchange-traded funds. ETFs are a collection of securities that trade on an exchange just like a stock does. The value of an ETF can fluctuate throughout the day and an individual ETF can only trade once per day after the market has closed.
New traders and investors may be attracted to investing in ETFs because they are incredibly easy to buy and sell. They stay liquid, so this means that selling is a quick process unlike selling physical Gold.
However, unlike physical Gold, there is no way to liquidate them if something goes wrong with the stock market. The major problem with investing in ETFs is that they are very expensive to buy into.
Just like buying physical gold, you need to have a lot of collateral upfront to purchase an ETF. However, you don't get the benefit of the price stability provided by buying precious metals physically.
The price of an ETF will change throughout the day and the market is a lot more volatile than the process of trading physical metals. You will most likely be trading with larger values and have a chance of seeing bigger profits - there will be more of a risk though.
Miners and Royalty/Streaming Companies
This final suggestion might be a great option for those of you who have a smaller pool of funds to be working with.
There are a large number of Gold, Silver, Platinum, and Palladium mining companies out there that are taking investments. There is also a range of ETFs that are made up of mining company baskets.
The things that put people off investing in precious metals - how long it takes to make a profit, the lack of liquid assets, and the price of buying into the markets - tend not to apply when you are investing in mining companies.
An investment into a mining company is more similar to investing in stocks than it is to buying physical Gold or buying into an ETF. Your assets are going to be easier to transfer and you are more likely to see a cash flow.
You may even get paid dividends. The main problem but also the main bonus of investing in mines is the amount of profit you will make will depend on the price of gold.
Imagine that the mining company breaks even if Gold is being bought for $500 per ounce. If gold is being bought at $450 an ounce then they are going to be losing money. However, if the price of gold doubles - as it has many times before - then the company will be making a huge amount of profit.
Any money and dividends that you will see will entirely depend on the value of gold and how much the mining company can sell their stock for.
Are Precious Metals a Good Investment?
Most investors that deal in stocks are skeptical about the idea of investing in precious metals. It seems like a very old-fashioned concept. But, we would argue that this form of investing has stuck around for so long because it works and you can trust it.
In this section, we are going to answer the question - are precious metals a good form of investment?
One of the major benefits of investing in precious metals is it allows you to diversify your portfolio away from stocks and cryptocurrency.
Investing in precious metals is a lot less risky than other forms of investments - unless you are investing in Silver.
Gold is slow, but reliable
If you are looking for a place to invest your pension funds or other long term saving funds, then you should really consider investing in Gold - both physical and ETFs.
Many people may be put off from investing in Gold because it takes a long time to make a profit when you purchase Gold. This is because the gold markets change very slowly over time unless a gold hoarder sells a huge amount of their stock.
Many people are put off by the low yield of investing in Gold, but the important thing to remember about Gold is that it has historically retained its value through the financial crisis and war.
Which can be more valuable in the long term than a high yield.
Silver offers great opportunities for profit
While Gold is slow but reliable, Silver is very different.
The industrial value of Silver is rising but its hoarding value is falling sharply. Silver jewelry is less valuable than it has ever been. When you are looking to invest in Silver you should invest in the miners rather than an ETF.
The Silver market is very volatile - this means that you can see large rises and falls throughout the day and these can be quite unpredictable. If you are able to buy and sell at the right time you will be able to make a big profit in a short period of time.
Palladium is in demand
Every year, more uses for Palladium are getting discovered. This only makes the metal more valuable. Palladium is never going to be more valuable than Platinum because there is a large supply of it.
But the one guarantee with Palladium is that it will always be in demand. Palladium is only going to get more important as governments start investing more in renewable energy and greener technologies - as it plays a key role in making this equipment.
Palladium is also starting to be used in place of Platinum in automotive catalyst converters.
Platinum is getting rarer
In the section above, we mentioned that Platinum is being phased out of industrial projects and being replaced with Palladium. This is not because Platinum is no longer a valuable metal - it is because it is becoming too expensive for industries to purchase.
Platinum gets its value from its rarity and it is only going to get more valuable as more of it gets used up. There are only two things that could reduce the price of Platinum - a Platinum hoarder selling their stock or a new (and very large) Platinum mine being discovered.
The second one is very unlikely to happen.
Risks of Precious Metal Investments
We have talked about the benefits of investing in precious metals, but it would be irresponsible for us not to talk about the risk of investing in them. All investments do come with risks, as there is sadly no way to make money without taking a risk.
Some types of precious metal investments are less risky than others but just like stocks, the high-paying, low risk investments are incredibly costly. Investing in platinum is the equivalent of buying stocks in Apple.
Here are four things that you should be aware of when investing in precious metals.
The Silver Market can be incredibly volatile
In the section above, we talked about how the Silver market offered the greatest opportunity to turn a profit and do it quickly. This is true, but it also means that trading Silver comes with the biggest risks.
Buying and selling at the wrong time could lead to you losing your investment. If you are not experienced in trading you should consider hiring an adviser.
A hoarder selling their stock or a new mine being opened can affect your profits
There are very few things and events that affect the price of metals negatively. Stock market crashes tend to send the prices rocketing up, as do wars.
However, there are two events that might affect the price of your assets. If a new deposit of rare metal is found and a mining company starts to extract it your assets may lose value unless you have invested in the mining company itself.
If someone who owns a large amount of a precious metal starts to sell their stock, there will be more of it on the market, it will be less in demand and the prices will temporarily decrease.
Precious metals are incredibly expensive to invest in
Most new investors won't be able to afford to invest in precious metals. This is the sad truth.
Buying into the precious metals market can be very expensive and requires a lot of cash to be deposited before you even start seeing a profit.
If you are young and do not have a lot of spare money to invest then this might not be the market for you. It may be better for you to invest in Cryptocurrency or stocks and then return to the precious metals market when you have more capital.
Keeping large amounts of physical assets can be dangerous and expensive
If you decide to invest in physical assets like gold bars or platinum jewelry then you need to be aware of the dangers of keeping these assets in your own home.
Once your investment reaches a certain level then you will need to find somewhere else to store them. This will involve spending the extra money to keep your assets secure.
If your collection of physical assets is big enough then it will be worth spending money on security to protect them. But this is an extra cost that you should be aware of before you buy physical precious metal assets.
Should You Invest in Precious Metals?
If you are looking for a low-risk investment opportunity that will slowly yield rewards then you should consider investing in precious metals.
The value of precious metals stays fairly constant, so you will not have to worry about constantly checking in on the market. They are also very unlikely to lose value - as there is only a finite amount of each metal on the earth.
The prices do not rise quickly, so if you are looking for a fast turn around then you will need to look elsewhere. However, if you are looking for a stable but long term investment then precious metals could be perfect for you.
Gold is the most popular type of precious metal to invest in, but there are many other options out there for you to choose from - including silver, platinum, and palladium.
If you need to diversify your portfolio then you should consider investing in heavy metals and you will find everything you need to get started in the article above. So, what are you waiting for? It's time to start investing in precious metals!
Precious Metals FAQ's
Before we leave you, we wanted to spend some time addressing the questions about precious metals that we get asked most frequently. You will find these helpful if you are looking to start investing in 2022.
Good luck if you do!
If you have a small pool of funds then you should consider investing in a mining company. This will be more similar to investing in stocks and you may get a return on your investment more quickly.
However, if you have a lot of money to invest then you should consider buying physical precious metals. You should bear in mind that if you buy physical metals then you will need to find somewhere safe to store them.
You will also need to keep a close eye on the market, so you can tell when to sell them.
The answer to this question will depend on two facts - what kind of investment you are looking for and how much money you have to invest.
If you are looking for a stale and long term investment then you should invest in either gold or platinum. If you are looking to take risks and try to turn a profit quickly then you should invest in Silver - although this is much riskier.
If you want to invest a large amount of money then you should consider investing in Platinum or Gold. However, if you are working with a small pool of money then you should invest in Palladium.
If you have enough money to invest in precious metals then it is generally a good idea to do so. The market value of precious metals very rarely drops because there is only a limited amount of these metals.
Precious metals historically have been immune to financial crashes, and many times their value has gone up when stocks and real estate have lost their value.
One of the main downsides of investing in precious metals is that they are very slow to turn a profit.
The most important question you can ask yourself when you are about to start investing is - how much can I afford to invest right now?
Many people get caught up in the idea of all the profits they are going to make in the future and invest more than they can afford. This is irresponsible as turning a profit when investing can be a slow process. You should only invest what you can afford to lose.
You should also never borrow money in order to invest. If you lose your investment then you will not be able to pay back your loan and you will be in a much worse financial situation than when you started.
I’m Donny. I’m a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.