Precious metals like silver and gold have for a long time been seen as very valuable and are highly coveted. Even currently, investors know to add these valuable metals to their portfolios.
Despite silver and gold being the most popular ones, other metals are quite valuable. However, knowing which one is great to invest in, or which is more volatile is important before you dive into investing in them.
There are also several ways to invest in them. Therefore, in this article, we will be discussing what you must know about precious metals.
We will be discussing the most common valuable metals individually to ensure clarity.
Silver is valuable for both its industrial and store value. Therefore, the price of silver is more volatile and fluctuates more than that of gold.
While this metal like gold is also seen as something to be stored, its industrial value quite strongly influences its price. Some of the things that have influenced silver price include:
- The great demand for industrial items that used silver inputs like medical products and electrical appliances. From electrical connections to bearings, and other properties of this metal made it become a quite desired item.
- The role of silver in photography. This role was quite predominant as the metal was used to produce photographic films that are silver-based. However, this invention has long been replaced by digital cameras.
- Its use in superconductor applications, microcircuit markets, and batteries.
It is not clear if these inventions will influence the metal’s general non-investment demand, or even if it does, to the extent it would.
Yet, the fact remains that the metal’s price is influenced by its application, instead of simply being used as value storage or fashion.
The chief of precious metals is often seen as gold and this is mostly due to how durable it is (it does not get rusted or corrode), its ability to conduct electricity and heat, and malleability.
When it comes to its industrial use, it has been used in two major industries, electronics, and dentistry. However, it is used as a currency and a jewelry base; these are what make gold more popular.
This metal market runs round the clock, and its value is based on this market. Sentiments are a dominant factor that influences its price; the laws of supply and demand do not influence the value as much.
You can check here to learn more about the laws of supply and demand. The reason for this is that the gold that is above-ground and hoarded greatly outweighs the current mine supply.
Simply put the price of the metal drops whenever hoarders feel and choose to sell, whereas, when they choose to buy, the supply is absorbed quickly, and the price is driven higher.
Some of the factors that influence the need to hoard this shiny item are:
- Political or war crises: when political or war upheaval is the order of the day, people are driven to hoard gold. One’s lifetime savings could be sized down and kept till it has to be exchanged for safe passage, shelter, or foodstuffs.
- Inflation: other assets like real estate, bonds, and equity can become negative due to inflation. When this happens, gold is coveted for its capacity to act as a hedge against inflation.
- Financial concerns: money and banks could get unstable, and the political environment can become unstable. Again, when this happens, gold is often sought after and hoarded as an asset that will retain its value.
Just like the valuable metals discussed already, platinum has a 24/7 market. However, this item can sell even higher than gold in times of political stability and routine market periods. This is because it is rarer.
Some of the factors that affect its price include:
- It is also an industrial item like silver. The major contributing factor for the demand for this metal is its use for automotive catalysts: It reduces emissions’ harmfulness. Aside from this, another reason for its demand is jewelry. Other contributing industries are computers and petroleum.
- There are just 2 countries where this metal is heavily mined (Russia and South Africa). Therefore, the chances of cartel-like activities are highly increased.
As a result of these, this metal is even more volatile than the rest.
Precious Metals Options
Below are some of the common options available to anyone that wants to invest in these valuable metals.
Bullion bars and coins should only be considered if you have safe storage for them like a safe or a deposit box.
Also, if you think the worst would happen (meaning you want to hoard the metal for its capacity to retain value), then it would make a good choice for you.
But, if this is not the case and you have a time frame, then holding any of these assets in its bullion form would be quite bothersome.
This is a very convenient means of trading silver, gold, and platinum. However, if you choose this method, you do not get to hold the asset in its physical form.
With these, you have every benefit of having gold in its physical form without having to worry about storage and transportation. They are usually just paper.
4. Futures and Options
This offers leverage and liquidity to those who are looking to have massive bets on these metals. The biggest losses and profits are often gotten from derivative products.
Is it a Great Investment Plan for You?
Making this investment would offer you so many benefits from their inflationary protection to their intrinsic value, and so on. There are many companies such as Goldco that can help you with your investment.
You can also find out about Goldco to gain further help on this matter. However, having just a small amount of any of these assets in your investment portfolio can help you reduce risk and volatility.
Also Read: Starting Your Investment In Gold
In this article, we have discussed 3 of the most common precious metals and some important facts about them.
We have also looked at some of the options that are available to you if you choose to make this investment.