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Updated: August 21, 2023

6 Best Precious Metals to Invest In: Pros and Cons

Published: January 04, 2023

There are plenty of benefits of investing in precious metals. At the same time, like all investments, they have their downsides. In this article, we’ll review the pros and cons of the best precious metals to invest in so you can identify which one is the most suitable according to your investment strategy.

1. Gold

Gold is one of the most traded investments to date, and probably what most people think of when investing in precious metals. Gold is rare and valuable, but it’s important to consider possible downsides of investing in it too.

Pros:

First and foremost, investing in gold has historically been the standard when it comes to preserving the value of your money against inflation. Inflation, or the gradual rise in prices in the economy over time, has reached drastic heights, which means Americans’ purchasing power is diminishing. One way investors have protected against that is by diversifying their portfolios with gold investments.

There's a good reason that central banks worldwide hold gold bullion as a reserve asset.

Cons:

On a case-by-case basis, a potential setback for investing in gold is waiting a long period of time to see a return. However, many gold investors may not have the goal of high investment returns with gold. Rather, they decide to invest in gold to preserve the value of their money over time.

Next step: Read our guide about the best place to buy gold in 2023 to learn more!

2. Silver

Silver is a popular precious metal investment that is often considered a hedge against uncertainty for its ability to hold its value over time during various economic conditions. Similar to gold, investors may hold on to silver for its role as a “safe haven” asset.

Pros:

Silver has a long track record of being a store of value. Investors view it as a hedge of protection against inflation and economic uncertainty. Since silver is cheaper than gold, it is thought to be a more affordable and accessible precious metal investment. Silver is able to accommodate a wide range of investor goals.

Over the centuries, silver has often served as a form of money.

The central reason silver has retained its value over time is because it is used in a variety of industrial applications, making it more immune in a recession when compared to other precious metals. In addition to its accessibility, silver can easily be bought and sold on major stock exchanges, online dealers or brokerage firms.

Cons:

Silver prices tend to be more volatile than gold in the near term. So investors who are sensitive to volatility may not be able to handle this risk and would feel more comfortable with a more stable investment.

Silver volatility is more evident because there are several factors that can influence its price. These include changes in industrial demand or global events that can make it difficult to gauge where the silver market is headed.

Next step: Read our guide about the best way to buy silver to learn more!

3. Palladium

Palladium is a rare precious metal that has multiple applications. But its demand is particularly derived from the auto industry. It can be mined in different countries like the U.S., Russia, and South Africa.

Palladium is very similar in appearance to silver and platinum.

Pros:

Palladium is a suitable portfolio diversifier because it’s an asset with lower volatility, a characteristic of most precious metals. However, palladium tends to have a higher price volatility relative to gold.

This can be seen as both a pro and a con. While precious metal investors prefer stability in their precious metal portfolio allocation, higher volatility could mean higher price appreciation for the asset, which means you can make more money.

Cons:

A challenging aspect about palladium is its lower liquidity. Because it is a rare metal, it isn't traded as much as other precious metals like gold and silver. This can also make palladium’s price volatile.

Next step: Read our guide about investing in palladium to learn more!

4. Platinum

Platinum is a precious metal that has many use cases such as the manufacturing of jewelry, catalytic converters, and electronic vehicles.

Pros:

Similar to other precious metals, platinum as an investment can be a great portfolio diversifier. While its value can change based on various economic factors, it is considered to be an uncorrelated asset to stocks and bonds. This means its price is influenced by different catalysts than those of traditional assets.

Platinum may serve as a suitable inflation hedge or hold its value better than other assets during times of high inflation. Lastly, platinum maintains its high value driven by industrial demand. There are many different industrial applications for platinum that can offer stability in platinum’s price.

1 oz platinum bars are the most common size for bullion investments.

Cons:

Some of the drawbacks on platinum investing include its volatility. Platinum’s market price can fluctuate due to a number of factors including supply and demand, macroeconomic changes, and global events. Furthermore, for investors who own or are interested in owning physical platinum, they must consider storage and insurance costs, which could ultimately eat into investment returns.

Another important con to consider is platinum’s illiquidity. Platinum, especially in physical form, is a less liquid asset, making it more difficult to sell if you need to convert to cash.

Next step: Read our guide about investing in platinum to learn more!

5. Copper

Copper is a popular investment since it can be used in a variety of products and industries. These include construction, transportation, and electronics.

Pros:

Copper is an in-demand metal due to its various applications in the global economy, which can help support its value higher. Similar to other precious metals, copper can act as a portfolio diversifier since it's an uncorrelated asset to the traditional stocks and bonds, reducing investment risk.

Furthermore, copper can help protect against inflation since its value rises as the cost of living and cost of production increase.

Large quantities of copper wire and copper piping are used in various industries.

Cons:

Since copper can be mined around the world, copper has geopolitical risk. In the event of a country known for mining copper deciding to change manufacturing or production procedures, that could disrupt copper end markets and impact the precious metal’s price.

Also, copper has a finite supply. So, if demand for it increases, that could lead to a copper shortage, hiking up its price.

6. Rhodium

This silvery metal is primarily used in the production of catalytic converters for cars. It is considered a very rare and expensive metal, whose price changes according to supply and demand.

Pros:

Rhodium is a rare precious metal that’s in limited supply. So, if demand increases over time, this could increase the precious metal’s price, making rhodium a suitable investment generating asset.

Rhodium has multiple applications that can keep its demand elevated such as its use in automobiles, which is a major sector of the economy. Since it has a high melting point, rhodium can play a vital role in many industrial applications.

Cons:

The market for investing in rhodium is smaller than most other precious metals on the list. Rhodium is not the most popular precious metal investment. It is still not considered a traditional precious metal, making it difficult for interested investors to find a variety of investment options or reliable information about it.

Investing In Precious Metals

There are a variety of precious metal investment options out there. They can help safeguard a long-term investment portfolio from inflation and recessions, two factors that have been ailing investors this past year. While gold and silver are the most popular, intelligent investors should keep learning what other options are available on the market and what potential benefits they could add to their strategies.

Precious metals include more than just gold and silver!

It has been a tough year for the stock market and investors are feeling the pain. The S&P 500 fell 20% in 2022 as companies have been faced with operating in a difficult economic climate plagued by high inflation, increasing interest rates and the possibility of a recession on the horizon.

While this not-so-good news is a challenge for investment returns, this is an ideal setup for precious metals, which have historically held up in performance during recessions. While gold is only up about 7% over the past year, it's still outperforming the broader market. This shows that precious metals are a great way to diversify your investments to protect against volatility of other assets in your portfolio like stocks and bonds.

Like any investment, precious metals are subject to risk and uncertainty, whether it be stock market fluctuations, economic tension or geopolitical instability. Follow the links below to shop for gold and silver bullion: