Investment strategies available for precious metals investments include exchange-traded funds (ETFs), mining stocks and royalty/streaming companies. Each form of investment offers distinct advantages.
Precious metals offer a global value that makes them an indispensable addition to any portfolio regardless of economic conditions, as their physicality helps ensure their value won’t quickly diminish and threaten to drain away your wealth.
Gold
Gold is one of the best-known precious metals. Investors buy it for jewelry, technology applications and as a hedge against inflation; currency devaluation protection; portfolio diversification benefits and portfolio allocation considerations are among other uses for its purchase. Gold typically represents only a small allocation within commodities indexes due to low correlations to stocks, bonds and other commodities.
Investors favor bullion for its portability and ease of storage, taking up less space while costing less to store compared to silver investments. But investing in bullion may prove costly as additional fees must be paid for storage and insurance costs.
Exchange-traded funds (ETFs) offer investors a popular means of diversifying into precious metals without owning physical assets directly. Traded on centralized exchanges, ETFs offer greater liquidity than futures contracts that require physical delivery of commodities to investors. Some ETFs even invest in rare-earth mining companies for further diversification purposes – though this approach poses its own unique set of risks.
Silver
When it comes to investing in precious metals, many investors tend to favor gold alone. This is because physical gold and silver have lower storage costs compared to other commodities, making them far simpler to access. Unfortunately, price increases of physical bullion or ETFs require multiple increases before breaking even with fees associated with buying, selling, storing the metal.
As Brock notes, the scarcity of certain coins may add value for collectors and numismatists; however, this doesn’t justify charging a premium alone. Instead, rare commodities can be attractive investments for investors due to their wide array of industrial applications (such as electronics manufacturing or photovoltaic solar panel production) as well as being less closely tied to stock market volatility; providing investors with an extra hedge or diversifier in times of economic distress.
Platinum
While gold and silver often take the spotlight when it comes to precious metal investments, platinum has quickly gained in popularity over recent years as an investment choice. Platinum is one of six platinum-group metals including ruthenium, rhodium, palladium and iridium and has various industrial applications; most commonly seen used for jewelry and dental work.
As with other precious metals, platinum usually performs best during periods of economic expansion. When manufacturing and industrial sectors thrive, so too does demand for platinum as an investment vehicle – making it an appealing short-term option that offers higher immediate returns than gold.
Investment in precious metals can provide your portfolio with diversification, but it’s essential that you first consider your goals and risk tolerance before diving in. Although rare commodities offer great returns over the long term, you could find yourself spending more time worrying over price fluctuations than building equity in a house or increasing savings through retirement accounts.
Palladium
Palladium, a silvery-white metal, is one of six precious metals collectively referred to as platinum group metals (PGM). Alongside platinum, rhodium, ruthenium and iridium it produces durable alloys used for industrial applications as well as dental components, jewelry production and groundwater treatment systems.
PGMs find their primary application in catalytic converters, which serve to break down harmful car exhaust compounds into less-harmful components – an indispensable benefit in light of stricter automotive emissions laws.
Just like gold and silver, palladium can be purchased as coins and bullion investments; however, its more often seen as part of a diversified precious metals portfolio. Many investors invest only small percentages of their overall holdings in palladium due to its rarity (30 times rarer than gold, 15 times rarer than silver), so finding sufficient coin and bullion options for this commodity can be more challenging.
