A Beginner’s Guide to Investing in Precious Metals

By Christian Nordqvist

For thousands of years, people have always valued precious metals. Whether an individual, a corporation, a merchant, or even a government, precious metals have always formed the core of wealth for an entity. For instance, gold which is the most expensive metal, has solely been the symbol of wealth and power since ancient times.

Coins made out of gold were considered more valuable than those made of other precious metals. Until the Nixon-led US government severed the dollar from the gold standard in 1975, the wealth of a country was measured by how much gold it had.

Today, gold is viewed as an investment rather than a form of currency. Possessing precious metals like gold, silver, and platinum provides a hedge for investors in times of economic trouble. Typically, when a stock market crashes and investors don’t want to place all of their money in bonds, they turn to precious metals.

Why Precious Metal Investments are Important

  • Precious Metals Provides a Hedge Against Inflation

Investors have long considered gold as one of the best forms of hedging against inflation. When inflation increase, the price of gold also increases, nullifying the effect of inflation for holders.

In comparison, the stock market value sometimes increases when there is inflation. However, this price increase doesn’t happen all the time. That’s why the moment fiat money starts to experience hyperinflation, investors and even traders turn to gold as a medium of exchange.

  • Asset Diversification

Precious metals are considered an option for investors who want to diversify their portfolios. When there’s an economic downturn and the stock and bond markets are experiencing a bear market, precious metals tend to increase in value. This allows a portfolio to remain balanced since the gains from the precious metals market will offset the losses from the stock and bond market.

  • Global Store of Value

Historically, gold, silver, and platinum tend to increase in value during economic and political uncertainty periods. Gold is also genuinely global as different civilisations have utilised it for numerous years.

Ways to Invest in Precious Metals

  • Exchange-Traded Funds (ETFs)

Exchange-traded funds are systems where a firm facilitates the deposit of cash to trade in a particular asset class for investors. For Gold ETFs, the firms invest exclusively in gold and possibly in other precious metals. Precious metals back these investments and the ETF undertakes investment decisions.

ETFs are a great and convenient way to gain from the precious metals market. You, however, need to note that even though you might be making a profit from the precious metals you do not own. Your trade is restricted to trading shares during periods when the precious metals market is on an uptrend or downtrend.

  • Common Stocks and Mutual Funds

Bigger investors can source funds for mining firms to make a profit. The major task is to spot a reliable company to make sure there’ll be gains.

Common stocks and mutual funds allow investors to make money from precious metals. Nevertheless, this system is not meant for newbie investors. The investors that partake in common stock and mutual funds typically employ a suitable manager to take control of the fund.

  • Stock Certificates

Stock certificates are verification of ownership of gold. Practically, an investor who holds a stock certificate doesn’t need to get involved in the issue of storing gold. The drawback of stock certificates is that they’re not viable for instant exchanging goods and services.

  • Physical Possession

The best way to invest in precious metals is to own them physically. Owing to online stores and bullion services, it has become easier to claim physical ownership of precious metals.

Gold and other precious metals are in different forms; bullion is the most popular. Bullion is a particular shape of a precious metal valued based on its mass and purity.

Conclusion

Precious metals like gold, silver, copper, and platinum have been considered a store of value for thousands of years. Precious metals are important because they provide a hedge against inflation, asset diversification, and a global store of value.

You can invest in precious metals through ETFs, common stocks and mutual funds, stock certificates, and by physically owning them.

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