When we talk about precious metals, we are talking about gold, silver, platinum, and palladium. These metals are regarded as precious because of their value in the market and the economy at large. As a result of this, many wise investors are investing in these metals as a means of diversifying their portfolios. Despite their profitability as investment commodities, you can still run at a loss if you do not have the right information and knowledge on how to invest in these items.
Therefore, in this article, we will present you with a simple and quick guide on all you need to know about investing in precious metals. This article will help you chart your path as you begin to diversify your portfolio with these commodities.
To get this done, we will look at each precious metal and assess its investment strengths and weaknesses. This method will enable you to ascertain which commodity is most suitable for you to invest in depending on your overall investment goals and plans.
Let us begin with aurum.
Gold is so popular and influential that it served as a monetary system known as the gold standard. Click here to read more about the gold standard. Aurum is very durable and is not subject to corrosion or rust. It is equally malleable and a great conductor of electricity and heat.
As a result of the above, it has electronics and dentistry industrial applications. However, it is known for its use in jewelry and as a means of financial exchange.
Gold’s value is not fixed as it is always on the market 24-7. Hence, its price keeps going up and down. However, its price change; especially its decline is not by a large margin.
The reason for this is that this commodity is not influenced by the general economic laws that govern demand and supply. Instead, aurum price functions purely on sentiment. Therefore, the above-ground size is usually larger than the current mine supply.
In other words, the price of gold drops when hoarders decide to sell, and the price goes up when the new supply from the mine is absorbed and bought quickly.
Since demand and supply do not affect the hoarding of gold, what does? Well, the following are the main factors that determine the hoarding rate of aurum:
- Political or war crises
- Systemic economic apprehensions
Argentum’s price is influenced by the fact that it is used in industries as well as its storage value. Hence, the price fluctuation is much more unstable than gold. Therefore, although folks will still hoard this item, its industrial usage brings into play the laws of demand and supply. This means that its price is affected by sentiment as well as demand/supply.
This balance has been affected over the years due to technological innovations such as:
- The use of silver as photographic film. This has been replaced by digital cameras.
- The use of silver in batteries, microcircuit markets, and superconductor applications.
- The increase in demand for electrical appliances and other items that need the input of silver in their manufacture.
This precious metal is also a 24-7 tradable commodity as far as the global commodity market is concerned. Interestingly, when sold per troy ounce, the seller often gets more profit when compared to gold profit sold at the same quantity. This usually occurs during periods of political and market stability since they are much rarer in those periods. When compared to aurum and argentum, much of it isn’t extracted annually.
Factors that influence the price of platinum include:
- Its industrial application in the automobile, petroleum, chemical, and jewelry industries.
- Heavy dependence on this metal in the automobile industry as it is used to provide clean air.
- Heavy mines concentration in just Russia and South Africa. Hence, prices can be artificially raised due to cartel-like activities.
As a result of the above, when the prices of all four precious metals are compared, platinum has the highest volatility. Hence, you need to consider this critically if you choose to invest in this commodity.
While palladium is not well-known as the others, its industrial uses are more. This metal has a shiny and silvery look and is used in several manufacturing processes especially industrial and electronics products. It also finds application in medicine, dentistry, jewelry, groundwater treatment, and chemical applications.
Unlike platinum that has mines in just 2 countries, palladium mines are located in 2 additional countries. These countries are the U.S., Canada, Russia, and South Africa.
Since it is malleable in its pure form, thin sheets can be created from it. Despite being malleable, when it is worked upon at normal room temperature, it becomes harder and stronger. The sheets can be used as fuel cells or solar energy panels.
Just like platinum, palladium is used to make catalytic converters. However, its durability is higher than platinum since it is durability strength is 12.6 percent more.
Different Ways to Invest in Precious Metals
The following are the different ways you can invest in these commodities:
1. Precious Metal IRA
Popularly known as gold IRA; this investment allows you to keep precious metals with the aid of a custodian as part of your retirement plans. Hence, since most of these metals (especially gold) appreciate over time, you stand the chance of getting huge returns when you become eligible to withdraw the commodities.
If you want to keep these items yourself, then bullion (bars and coins) is the way to go. Check Boston Bullion review to learn where you can purchase quality bullion precious metals.
3. ETF (Exchange Traded Funds)
This option is not open to palladium; hence, if you choose that item, you cannot make this investment choice. With ETFs, you can easily purchase and sell the other three metals. However, the commodities will not be physically accessible to you. Hence, you cannot claim the items in the exchange-traded fund.
Other ways to invest include:
- Mutual funds and common stocks
- Futures and options
In the article above, we have discussed the various precious metals and different ways you can invest in them.