3 Benefits of Investing In Precious Metals

Last updated on June 1st, 2023 at 10:32 pm

There are a lot of investment options today thanks to the use of technology yet one has remained a favorite for decades and stood the test of time – precious metals investing. The most popular metal for
investment is Gold, which has been used as a store of value for millennia, but there are also many more types of precious metals to buy or invest in. Some of the other alternatives include Silver, Platinum, and Palladium, all of which can be easily purchased in the open market.

If you are thinking about investing in Precious Metals, a Precious Metals IRA is the simplest way to do so. Here is a list of Gold IRA companies that we have reviewed to get you started in finding out how …

• Augusta Precious Metals
• Birch Gold Group
• Advantage Gold

What do precious metals have over other assets?

Mankind has always been obsessed with precious metals for various reasons. Gold is the most commonly mentioned precious metal and is also the most heavily traded to this day. Nevertheless, other precious metals seem to follow the trend of gold despite the difference in price. There are several reasons for this phenomenon, and why you should also consider an investment in these precious metals.

1. Precious metals have intrinsic value

The main reason for investing in precious metals is their intrinsic value and thus, can be used as a store of value. Over the years, the value of the US dollar has decreased drastically and is worth about 5% of what it was back in 1913. This is primarily due to inflation which, inasmuch as it is necessary, decreases the value of a currency.

A central bank’s main function is to keep a balance between inflation and the supply of money. These central banks do this by ‘creating’ more money, but only enough to maintain inflation at the desired level. That is why public debt today in the US is up to $22 trillion, with only the belief that the US will honor these promises.

However, precious metals are rare and their supply is limited without the possibility of creating more. Such limited supply makes these metals more valuable than other commodities and even currency. For this reason, these precious metals retain their value regardless of the state of the global economy. Therefore, gold and other precious metals retain their value and are always preferred by investors to ensure long-term retention of wealth.

2. Precious metals hold up despite economic uncertainty

Financial markets like stocks, commodities, and currency are usually prone to drastic changes in prices from one day to the next. It is not uncommon to observe stock prices dwindle by double digits within
weeks and even days for various reasons. There are many examples of this such as those that tanked during the dot-com bubble that finally burst in 2000. More recently, companies like Yahoo! and Blackberry are struggling to find some footing after their stocks suffered due to competition.

Meanwhile, precious has always increased in value over the decades despite a few moments of fluctuation. For an investor, these metals become a great solution for hedging against market uncertainties. Had you invested in both precious metals and companies like Yahoo!, the loss would not be as great as that felt by someone who only invested in the stock. Besides, precious metals rarely experience massive intraday fluctuations in price because of their intrinsic value and rarity.

3. Privacy and tax relief

A World Gold Council report indicated that new markets such as China have been purchasing a lot of physical precious metals. This is most likely due to the privacy accorded by precious metals, especially in a country with strict money controls. Even for those living in a free-market economy, the need for privacy is still strong, which can be illustrated by the growing demand for cryptocurrencies. One major reason for this is to avoid paying high taxes that would have to be paid for other investments.

How to invest in precious metals

A straightforward means of investing in precious metals is to purchase them physically in the form of bars or coins from gold companies. One example is the report by the WGC which indicated that physical purchases of gold accounted for two-thirds of global investment in gold. With these bars and coins, one can easily exchange them for currency regardless of their physical location because they will always have value.

When buying bullion and coins, you should always be careful about where you source the precious metals to ensure purity. Buying jewelry made from precious metals is not always advisable because the price offered is the retail price and not the actual value of the metal. Furthermore, such physical caches of precious metals are risky because of theft or loss. That is why most investors purchase gold futures instead. Futures contracts give the holder of the contract assurance that they can buy the underlying asset at a particular price in the future. It is also possible to sell the contract before the expiry date on the futures market and make a profit thereafter.

Other alternatives for buying precious metals include mutual funds, ETFs, and individual company stocks that produce the metals. Mutual funds and ETFs have become very popular nowadays because they diversify investment and ensure long-term growth. Some mutual funds and ETFs focus specifically on precious metals while most include other assets in their portfolios. As for individual stocks, it is possible to purchase the shares of a company that produces a particular metal because the share price will mostly follow the value of the metal it produces. An added benefit of doing this could be the dividends issued by the company that could provide passive income.

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