A Successful Investor’s Guide to Precious Metals

Precious metals have been around long before our time and will continue to be here long after. But, does that make them an attractive investment opportunity?

During periods of economic contractions, investors look to precious metals as a “safe haven” to park their money, such as during the great recession spanning from 2008 to 2012.

With many people expecting inflation to pick up due to fiscal policies implemented during the pandemic, is it time to buy precious metals again?

Keep reading this guide to learn exactly what are precious metals and how they can help protect your portfolio when you need it most. 

What Are Considered Precious Metals?

Precious metals are rare earth metals that are widely considered to have a rich value within the economy. 

There are a few different types of precious metals, but there are a few more popular options among investors, which include:

  • Gold
  • Silver
  • Platinum
  • Copper
  • Palladium

Gold and silver tend to be the favorites for active investors, which can be seen in the appreciation of the share prices when compared relatively to their peers. These rare earth metals have been around since ancient times, is regarded as highly valuable due to the scarcity of the elements. 

As time passed, Gold became highly regarded as a form of currency, and in 1834 the United States passed the Gold Standard Act. What the act did was ensure the price of gold remained somewhat stable and allowed for the free conversion of gold to another currency. 

Gold acted as an international standard and helped regulate the value of other countries’ currencies.

What Are Precious Metals Used For?

Precious metals have other uses other than just being used as a form of currency or a store of value. 

Some of the more prominent uses for precious metals include being used in art and jewelry. But today, these rare metals are being used as a form of investment and used to protect an individual’s portfolio from the dangers of inflation. 

Precious metals such as gold and silver also have industrial uses – increasing their value even further. 

Gold

Gold is used to make certain electronics and is an excellent conductor of electricity. Individual aerospace companies utilize gold on their space vehicles to act as shields to the powerful heat. 

You can spot gold from a mile away in jewelry with its incredible shine and appeal.

Silver

Silver, often overlooked by its counterpart gold, is still valuable and has many industrial uses. Before digital cameras were introduced, silver as one of the main components in the photography development process. 

You may also notice silver cutlery in people’s homes – as it is easy to shine and doesn’t corrode as easily. Scientists have even experimented with silver and its ability to kill bacteria when used in medicine. 

Platinum

Platinum has also been used in industries since the ancient Egyptians used the fine metal in rituals and wore it as ceremonial jewelry. Today, it is used to make specific parts of an automobile, like in the catalytic converter.

It is also being used in electronics to allow for more storage. Platinum is even being used to extract gasoline during oil refining.

What Are the Benefits of Investing in Precious Metals?

With so many different industrial uses, precious metals are not only suitable to use in jewelry – they can also make excellent investments. 

During historical periods of political or economic unrest, investors lined up to invest in these precious metals, looking for a way to escape the devaluation of currencies. Gold is by far the most popular, followed closely by silver. 

Investing in rare earth metals during these times has proved to be an effective strategy in protecting an individual’s portfolios from sharp price corrections. With investments, it’s best to diversify your portfolio and include different types of investments to protect yourself from losing it all. 

How to Invest in Precious Metals

There are several different ways to invest in precious metals – each coming with its own risks and benefits. Before investing in rare metals such as these, it’s critical to understand precisely what you are investing in. 

ETF

Exchange-traded funds (ETFs) can provide an excellent way to invest in a diverse exposure of precious metals. These funds are typically highly liquid and can be traded with a number of strategies. 

Some of the best ETFs for precious metals include the SPDR gold trust (GLD) and the iShares silver trust (SLV). 

Physical Bullion

You can also purchase and hold precious metals in physical forms, such as coins and bars. The trick is to find bullion that trades closer to spot prices as some are more than others. 

Gold bars, gold and silver coins, and constitutional silver are favorites among investors.

Mining Companies

Another interesting way of investing in precious metals is through mining companies. These companies physically mine and sell precious metals. These investments can be tricky because the stock price not only relies on the precious metal it harvests. It is also dependant on other factors such as ownership and management, labor, and environmental issues. 

A few well-respected investors took this route recently with the pandemic looming. One of the most famous of them, Warren Buffet, recently bought $562 million worth of Barrick Gold, a gold mining company.

Mutual Funds

Mutual funds can give great exposure to various precious metals, making it a favorite among investors looking to diversify their holdings. There are several different precious metal mutual funds to choose from. 

Some are primarily focused on US operations. Others can diversify across the globe. The fidelity gold portfolio fund (FSAGX) is one of the most popular mutual funds for investing in precious metals.

Futures

Futures trade a little differently than the others listed here. Commodities, such as precious metals, can be traded on the futures market as speculation. 

When trading futures, they have a specific price that you agree upon to be traded at some point in time. 

What Are Precious Metals: Digging Deeper

Precious metals have so many uses and can make great additions to anyone’s portfolio. They not only create stunning jewelry, but they can also help protect against the potential risks of inflation.

If anyone ever asks you, “what are precious metals?” You can now tell them about how great of an investment they are as well. 

For more information on precious metals and other investments, check out the rest of our website!