Who Invests In Precious Metals?

Precious metals such as gold, silver, and platinum are popular investment options due to their rarity and historical value. Gold, in particular, has been coveted by ancient civilizations and continues to be sought after by investors today. While gold is the most common investment choice in this sector, other precious metals like silver, platinum, and palladium offer their own unique risks and opportunities. Investing in precious metals can be done through various methods, including buying physical bars and coins, investing in futures, ETFs, and mining company stocks.

Gold, silver, platinum and palladium are all precious metals that can be added to an investment portfolio

Gold, silver, platinum, and palladium are all precious metals that can be added to an investment portfolio. Each metal has its own unique risks and opportunities. Here is a breakdown of each:

Gold

Gold is the most popular precious metal for investment and has been recognised as a valuable metal for thousands of years. It is known for its durability, malleability, and ability to conduct heat and electricity. Gold is also a safe investment that can protect portfolios during times of financial, economic, or political turmoil. Some advantages of investing in gold include its high liquidity, resistance to inflation, and ease of transport. However, gold is expensive and may not see significant growth until a few years after the initial investment. Additionally, gold bars and coins are often counterfeited, so it is important to purchase from reputable dealers.

Silver

Silver, like gold, has long been considered a reliable investment option. It is much more accessible to small investors due to its lower cost. Silver is also used in various industries, including automobiles, medical cutlery, smartphones, and solar panels. However, silver prices are often more volatile than gold prices, and storing and transporting silver bars or coins can be challenging due to their weight and size.

Platinum

Platinum is a precious metal used in the jewellery industry and various industrial applications, such as electronics and automotive catalytic converters. It is much rarer than gold, which can make it more valuable. Platinum is also corrosion-resistant and can be stored in a compact space. However, it has a high entry threshold and stagnant values in recent years. Additionally, the purchase of platinum is subject to VAT in some countries.

Palladium

Palladium is a lesser-known precious metal but is highly valued due to its rarity and industrial uses. It is used in manufacturing processes, particularly for electronics and industrial products. Palladium is also used in dentistry, medicine, chemical applications, and groundwater treatment. Investing in palladium can be risky due to its strong dependence on global economic and industry conditions, but it offers the potential for quick profits due to its strong fluctuations.

Overall, precious metals can be a valuable addition to an investment portfolio, providing diversification and protection against inflation and economic uncertainty. However, it is important to consider the risks and potential drawbacks of investing in each metal before making any decisions.

Precious metals are a hedge against inflation

Precious metals like gold, silver, platinum, and palladium are a good hedge against inflation. They have intrinsic value, carry no credit risk, and cannot be inflated.

Gold, for instance, has averaged a compound annual growth rate (CAGR) of 7.86% from 1970 to 2017, outperforming the Dow, which achieved a CAGR of only 7.28% in the same period. Gold is also a safe haven for investors to protect their portfolios from large stock market declines. During the 2008 market crash, the price of gold went up while the S&P 500 lost half its value.

Silver has also performed well between 2016 and 2021, with a 65% return over four years. Palladium prices have been on a steady upward trajectory since the 1980s, and if you had invested at the lowest price and sold at the highest price, you would have achieved more than a 300% return on your investment.

Platinum prices have been relatively stable over the past four years, hovering between $900 and $1,100 per troy ounce. However, in February 2021, the price spiked to $1,293 per troy ounce, which would have resulted in a nearly 108% return on investment.

Precious metals have historically had reasonably high returns and performed better than more volatile investment options. They are a good way to diversify an investor's portfolio and can act as a hedge against inflation. However, it is important to note that the performance of any investment cannot be guaranteed, and there is always some risk involved in investing in precious metals.

They are also a good investment during times of economic uncertainty

While it is difficult to ascertain exactly how many people invest in precious metals, it is clear that they are a popular investment vehicle.

Precious metals are a good investment during times of economic uncertainty for several reasons. Firstly, they are often seen as a safe haven in times of financial instability. When banks and money are perceived as unstable, or there is political upheaval, gold has traditionally been sought out as a safe store of value. This is because it has an intrinsic value that is not tied to the performance of other assets, like stocks and bonds. This low or negative correlation to other asset classes means that even a small percentage of precious metals in a portfolio will reduce both volatility and risk.

Secondly, precious metals can act as a hedge against inflation. When real rates of return in the equity, bond, or property markets are negative, people tend to invest in gold, silver, or platinum as assets that will maintain their value. This is especially true in times of high inflation or when investors are concerned about rising consumer prices.

Thirdly, precious metals are a good investment during times of economic uncertainty because they are a finite resource. Gold, for example, has durability and is not affected by rust or corrosion. It also has industrial applications in dentistry and electronics, as well as being used in jewellery.

Finally, precious metals are easily accessible to investors. They can be purchased in the form of bullion (bars or coins), through shares in mining companies, or via exchange-traded funds (ETFs) that invest in mining companies or are backed by physical metals.

You can invest in precious metals through mutual funds or ETFs

Precious metals are a great way to diversify your portfolio and protect your investments. You can invest in precious metals through mutual funds or ETFs (exchange-traded funds).

Mutual funds are a good option for investors who want to buy and sell traditional equities and are aware of the factors driving the overall market. Mutual funds can be purchased and sold just like stocks in other industries and sectors.

ETFs, on the other hand, are a type of security where investors pool their money into funds that own various financial assets such as stocks, bonds, currencies, futures contracts, and commodities like gold bullion. Precious metals ETFs can include holdings of physical metals, shares of mining and production companies, or both.

Mutual Funds

• First Eagle Gold Fund
• Invesco Gold & Special Minerals Fd
• Allspring Precious Metals Fund
• Victory Precious Metals and Minerals
• Franklin Gold and Precious Metals Fund
• VanEck International Investors Gold Fund
• American Century Global Gold Fund
• Fidelity Select Gold Portfolio Fund
• Gabelli Gold Fund
• USAA Precious Metals and Minerals

ETFs

• SPDR Gold Shares
• IShares Silver Trust
• Abrdn Standard Physical Platinum Shares ETF
• Abrdn Standard Physical Precious Metals Basket Shares ETF
• Abrdn Standard Physical Palladium Shares ETF
• IShares Gold Trust Micro ETF (IAUM)
• SPDR Gold MiniShares Trust (GLDM)
• Abrdn Physical Gold Shares ETF (SGOL)

When deciding whether to invest in mutual funds or ETFs, it's important to consider the benefits and drawbacks of each option. Mutual funds may provide more stability, while ETFs offer more flexibility and liquidity. Additionally, ETFs tend to have lower expenses and minimum investments than mutual funds.

Gold and silver are the most commonly purchased precious metals

Gold and silver are the two precious metals most commonly purchased by investors. They have been recognised as valuable metals since ancient times and are still considered important for investment portfolios in modern times.

Gold is the most common investment in the precious metals sector. It is unique for its durability, malleability, and ability to conduct heat and electricity. It is also known for its role as a base for jewellery and as a form of currency. Its value is determined by the market 24 hours a day, seven days a week, and is influenced by factors such as systemic financial concerns, inflation, and war or political crises.

Silver is also a popular investment choice, though its price tends to be more volatile than gold due to its dual role as a store of value and an industrial metal. Silver is used in electrical appliances, medical products, batteries, and other industrial items. Like gold, silver is also valued for its role in art, jewellery, and coinage.

Both gold and silver are sought after by investors as a way to diversify their portfolios and as a hedge against inflation and financial uncertainty. They are also valued for their intrinsic worth and ability to maintain value during times of economic or political instability.

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