Essential Things You Should Know About Gold And Other Precious Metals

 

If you are planning to invest in precious metals, you must be wondering whether to invest in gold, silver, or other precious metals. There is no doubt that nothing can beat gold and silver when it comes to the best-known precious metals. Gold is widely used as an investment by central banks and big financial institutions. In fact, many retail investors also use it as a store of wealth worldwide, and most people consider it superior to paper currency.

Silver is also widely seen as a good investment when it comes to precious metals. One of the most significant differences between gold and silver investments is that silver is widely used in various industrial applications. In fact, it is estimated that more than half of the annual supply of silver is meant for industrial applications. In contrast, less than 1/8 of the yearly supply of gold is intended for any industrial application.

Is Gold the Best Precious Metal?

When you look at precious metals from a return perspective, you will find that no other metal has as long an investment history as gold. After all, when paper currencies were first introduced economies, these were backed by gold. In short, it has a lot of history when it comes to investment asset classes. Silver also has a long history, but it is not widely seen as an investment asset.

Global investors also eye various other precious metals. Some of the common examples include platinum, palladium, and copper, among others. These metals should ideally form part of an ideal investment portfolio where a significant amount of the portfolio is invested in precious metals. In a perfect scenario, a substantial portion of your investment money should be invested in precious metals in addition to investments in stocks, bonds, CDs, and mutual funds. The most significant advantage of investing in precious metals is that you make your portfolio more diverse, and that should protect your portfolio in times of economic downturn.

As far as distributing your investment in precious metals is concerned, you should take a close look at the historical increase in the prices of various precious metals such as gold, silver, platinum, palladium, and copper to divide your portfolio among these metals adequately. There is historical evidence to suggest that the price of gold has continuously increased during economic downturns. Take the example of the 2008 financial crisis, and you’ll find that gold had given the highest return to investors even when stocks were wiped out and interest rates on bonds and CDs were almost negligible. Similarly, the return on investments in silver has also been good. Investment in silver has returned more than investment in gold if you compare a specific period. Therefore, you cannot say with certainty that gold is the best precious metal for ROI.

According to this Augusta Precious Metals review, while gold does not provide the best returns compared to other metals, there is one other thing you need to consider before buying any precious metal, and that is volatility in the prices of these metals. The gold market is enormous, and the main reason for this is the high prices of gold. On the other hand, other precious metals such as silver, platinum, and palladium are good assets, but they also witness high volatility. The price of silver is highly volatile as most of it is used in various industrial applications. If there is an economic downturn, the demand for silver will obviously go down, which should affect its price.

Similarly, other precious metals such as copper and palladium are also widely used in a variety of industrial applications, and their prices are also closely linked to the global economy. On the other hand, the price of gold hasn’t shown as much volatility as the prices of other precious metals. In short, it won’t be wrong to say that gold is much less volatile as compared to other precious metals.

Also, gold is likely to outperform other precious metals in the long term. Therefore, if you’re planning to park your money for long-term (more than 5 years), it makes sense to invest most of it in gold. Even if it does not outperform other investments, you can rest assured that you won’t lose money as gold prices will always go up in the long term. You can hold on to your gold investment and be sure that you will never lose money.

Benefits of Gold Investment

From time immemorial to the rise of our super-modern technological era, the history of humanity has been formed in many ways around the acquisition of gold. Some say this is a simple case of simple outdated fascination in a barbarian relic and no longer holds value as it did in the past. After all, most of us will achieve wealth in paper money and never actually own a gold coin in our lives.

So, has the value of gold diminished with the rise of digital currencies and modern financial technology? According to the experts, not at all!

Let’s look closer at three important reasons investing in gold is one of the best assets for any investor’s portfolio.

Why do investors buy gold?

Gold a timeless asset that has played a central role in economies from ancient civilizations like Akadia and Egypt to the modern superpowers. While it is no longer the most relied upon a unit of currency as it once was, it’s still one of the most reliable investments and plays an especially important role in times of economic instability or collapse.

Inflation hedging

One of the best reasons to invest in gold is for its impressive capacity to hedge accumulated wealth against economic upheaval. Today’s smartest investors will accumulate gold to protect against inflation and social unrest. To put this simply, the value of gold tends to rise with the cost of living. This capacity is a primary reason that gold reduces the risks to investor’s portfolios.

Therefore, if the currency loses its value because of inflation, the cost of gold increases. This means that the investor with a gold portfolio has protected the value of their wealth against inflation, called “hedging”. As inflation increases and negatively impacts the value of the economy, the value of gold increases. Therefore the investor is well compensated for every ounce of gold they own.

Relative performance

The price of gold will fluctuate just like the economy, but in the long term, it will perform far better than other accumulated assets like property. Unlike stocks or bonds, the ROI of gold is based on price appreciation. Of course, gold has other considerations for the investor. Because it is a physical asset, it must be properly insured and stored. This is something that will have to be considered when adding gold to one’s investment portfolio.

Diversification

Furthermore, the value of gold will not be moved in the same way the value of stocks and bonds will. Because gold will not be affected by the same drop and rise as the stock market, it’s a foolproof way to diversify your investment portfolio.

Diversification is an important term to the investor and basically means that wealth is spread across a variety of different asset classes. This way, if the asset value drops considerably, there is a good chance that the other asset classes can help to compensate for the drop.

Even with gold, however, diversification is important. If the price of gold decreases — and it can and it will — all gold investments will take a beating. If, for example, many gold hoarders decide to sell their cache at once, the value of gold will drop and take the investment portfolios with them.