7 Benefits of Investing in Precious Metals
Perhaps you’re thinking about investing in precious metals because bullion prices are on the move. Or maybe you have a friend who has made money buying and selling gold and silver as part of their investment portfolio.
There are many reasons you should invest in precious metals. It's not just because bullion is a popular investment or current prices potentially signal an excellent opportunity to get in on the action!
Here are seven compelling reasons you should invest in precious metals:
1. Low barrier to entry
Stocks may be exciting to invest in, but you’ve usually got to work through a broker to buy and sell them. Don’t forget the forms and other hurdles. And real estate? Talk about paperwork…
But with precious metals, you can buy and sell without having to worry about red tape. This is because buying gold, silver, and other bullion is about as easy as purchasing a book on Amazon or picking up a shirt at the department store.
This is especially true with gold exchange-traded funds (gold ETFs) such as the SPDR Gold Trust. It can also apply to gold mining stocks (i.e. shares of mining companies) and futures contracts.
2. Hedge against inflation
They say a dollar isn’t worth what it used to be. Whoever “they” are really knows what they’re talking about, too. Have you seen the prices for groceries, gas, or even lumber lately? Government-issued currencies always tend to lose value in the long run. Over time, currency devaluation through inflation will hinder your ability to build wealth.
The purchasing power of the dollar has been shrinking for the past century.
As the dollar and other fiat currencies weaken in value, the value of gold and silver is marching to the beat of its own drum. And this can be good because when the dollar stutters, precious metals typically soar. Time and time again, precious metals have proven to be solid financial instruments even when the economy is shaky.
3. Tangible asset
Company shares may represent your piece of the corporate pie, but unless you hold significant stakes in something, do you really “own” that business? Why, even your house? Unless you own it outright, free and clear—no mortgage or second mortgage, that is—it’s not really your house.
But precious metals? They’re yours. Even if you choose to store your bullion offsite as part of a precious metals individual retirement account (Gold IRA), that asset is yours. You can sell it, pass it on to the next generation, whatever you care. You can’t beat the feeling of security and satisfaction that comes with owning precious metals.
You can learn more about any storage fees and annual fees when storing your gold by following the link.
Gold and silver bullion are tangible assets that you can physically own.
Moreover, the precious metals (especially silver) have important industrial applications. For platinum, these industrial uses include the catalytic converters that reduce pollution from your car exhaust. This is another advantage of owning a physical asset in physical form.
4. High liquidity
Investing is one thing, but getting a good return on your investment is something else entirely. Often, investments can be complicated to sell. Think about homes in withering cities that are losing people to greener pastures or property in a neighborhood that has seen a spike in crime or pollution. You may not get back what you paid into a property—if you can even sell it at all.
But gold and silver? Those are different. Whether the economy is good or bad, you’re going to find plenty of buyers to take those precious metals off your hands, and at the right price, too. That makes the metals highly liquid. Their track record of past performance confirms this (although that is no guarantee of future results, of course).
5. Timeless investments
Think about some of the investments that people drop big bucks on today but weren’t around 50 years ago, 40 years ago, even 20 years ago. Are cryptocurrency or non-fungible tokens (NFTs) coming to mind?
Then consider gold and silver—two precious metals that humankind has treasured for at least 5,000 years. Some alternative investments may disappear with the next cyberattack, but gold and silver aren’t going anywhere. Their outstanding importance in the arts, jewelry, industry, and the list goes on and on ensures that gold and silver, along with other precious metals, will always represent something of coveted value—no matter what.
6. Portfolio diversification
We've all heard the advice, "don't put all your eggs in one basket." This directly applies to the precious metals. You never want your investment portfolio to be made up of only one type of asset. Mixing different asset classes can improve your portfolio's risk tolerance.
One of the biggest strengths of gold is in this regard is that is a non-correlated asset. Its price tends to move independently of other global markets, like stocks or bonds. This ensures you get the benefits of a truly diversified portfolio. In the event the stock market crashes, you won't be wiped out.
Unlike stocks, alternative assets like gold bullion have intrinsic value. Though the metals do not produce cash flow, they are valuable regardless of economic conditions or market conditions. This makes previous metal investments a good investment for a self-directed IRA.
7. Safe haven
Gold and silver have each earned the status as safe haven investments. "Safe haven" means that these metals provide stability and a safety net during times of economic stress. Even in a bad economy filled with market volatility, gold prices hold their value—and spot prices even tend to rise.
Another aspect of being a safe-haven investment? Gold and silver are free from government meddling that can impact their value. Political instability, credit risk associated with government bonds, and cental banks manipulating interest rates all pose unique risks to your finances. Yet a diverse portfolio holding precious metals are largely immune to these sources of economic uncertainty.
Options for Investing in Precious Metals
The reasons to invest in precious metals are too many to list here, and there are plenty of ways to start investing in gold and silver. The first step is knowing what kind of precious metals options are available to you:
Coins can serve as both investments and collectibles.
One of the most common avenues for investing in bullion is buying coins with precious metals. Gold coins and silver coins are the most popular options for many investors, but platinum and palladium coins are also becoming more en vogue.
One of the many benefits of investing in bullion coins is that they are minted and guaranteed by the government. And, because they are monetized, they will always be worth at least their face value and can theoretically be spent as money.
The Silver Buffalo Round is a popular design.
Rounds usually are less expensive than coins but can offer the same type of aesthetic allure that coins afford. Rounds are also highly collectible, meaning they enjoy a dual market among both bullion investors and those who collect exonumia, like rounds.
Precious metal rounds are normally a product offered by private minters. Some government mints—including the United States Mint—also sell non-monetized precious-metals products that are effectively classified as rounds.
Gold and silver bars come in a variety of sizes.
This is generally the least expensive option of the three. Gram for gram, bars provide the most economical path to owning precious metals.
Like rounds, bars are usually produced by private ventures, though some government mints, including the Royal Canadian Mint, make and distribute ingots.
Meanwhile, many of the private mints that sell bars have become household names in the gold- and silver-stacking world. Their products serve every bit as much a collectible as it does a bullion asset.
Ready To Buy Precious Metals?
Whichever precious metals products you decide to invest in, be sure you buy them from a reputable dealer. Unfortunately, there are too many counterfeit coins, rounds, and bars out there. Many fakes are posing as the real deal—and perhaps undetectable to the untrained eye.
But you don’t have to worry when you buy your bullion items from a dealer that knows what they are doing. They will also stand behind what they sell with a satisfaction and authenticity guarantee.
It’s best to seek out bullion dealers who offer a wide range of the products you wish to invest in. The best gold and silver dealers are affiliated with prestigious organizations, such as the National Inflation Association and the National Coin & Bullion Association.
Beyond boasting a broad network and offering a good selection of quality bullion, your gold and silver dealer should be willing to happily educate you on your options. That way, you can make the most informed investment decisions on the precious metals you wish to invest in.
Joshua McMorrow-Hernandez is a journalist, editor, and blogger who has won multiple awards from the Numismatic Literary Guild. He has also authored numerous books, including works profiling the history of the United States Mint and United States coinage.
More information about how to invest in precious metals from the authors at Gainesville Coins: