The Basics Of Investing In Precious Metals

Precious metals image 8888When it comes to managing your investment portfolio, diversification is one thing you must get right. Therefore, having an allocation to a few precious metals such as silver and gold is an important component of investment diversification to minimize risk. However, learning or figuring out where to begin may prove to be an overwhelming task. This guide gives you a simple overview and tips to investing in some of the precious metals.

Coins and Physical Bars

The purest way of investing in silver and gold involves buying the actual bars and coins. The coins and bars made of silver, gold, palladium, and platinum are readily available from dealers all over the globe and the prices for the coins move with the precious metal prices. The coins and precious metals can be traded at discounts or premiums to the actual metal prices. The differentials come about due to supply and demand. Establish a good relationship with suppliers or companies that can supply you with these precious metals. They should also be able to buy the metals from you in the event that you decide to sell. It is important to note that the best time to buy silver for investment purposes is in June, followed by August, and September while the best time to buy gold is in March.

As you prepare to buy the physical forms of precious metals, find a reputable dealer or company. Many banks and dealers may advertise online, offering physical forms of precious metals available on the retail market. Compare the prices and offerings of the dealers and exercise caution. Note that anyone offering to sell you precious metals at a price significantly lower than the market rates could be engaging in fraudulent activities.

Futures & Options

Options and futures on the future metals are derivatives. Futures contracts are traded on exchanges and they employ a delivery mechanism for both sellers and buyers. A futures position is ultimately the physical position of the metals at the time of delivery and a seller or buyer has the power to control the position of precious metals by making a down payment.


Perhaps the simplest way to invest in precious metals involves buying ETFs (exchange-traded funds). The key benefit is that these are particularly liquid and you can use your brokerage account to buy or sell. This method allows for easier portfolio rebalancing while offering you a hassle-free and inexpensive buying and selling process. As the ETFs gaining more popularity, the trend for this investment option becomes cheaper.

Mining Equities/Miners and Royalty

You can choose from a number of precious metal mining companies in different parts of the world to invest in. The benefit of investing in miners is that they find a way around a myriad of issues relating to the investment of precious metals. While precious metals cost a considerable amount to manage and do not produce any cash flows, miners, on the other hand, pay dividends and produce significant cash flows.

Investing in precious metals as a way of diversifying your investment portfolio from stocks and bonds is a good idea considering they have their own opportunities and risks and are somewhat uncorrelated. From above, it is evident that there are several ways of investing in precious metals. However, the best method varies depending on your personal investment goals.