Usually, when people discuss investing in precious metals, they're talking about buying and selling gold, silver, or platinum. This investment takes two forms. Sometimes, people will buy the physical metal and store it somewhere privately. For example, people will often purchase gold and silver coins and keep them in a safe or safe deposit box at their bank. Another option is to buy a precious metal ETF. Essentially, this means you're buying a stock whose price is tied to the current value of that precious metal, usually meaning that the ETF represents ownership of some small amount of that metal. If the value of the metal goes up, the value of the ETF goes up.
What are Precious Metals?
We know what precious metals are, but why the name precious metals?
Precious metals are precious because they are rare. There is a limited amount of these minerals produced each year, and scarcity is the reason for their value. The three primary precious metals that trade on forex exchanges worldwide are gold, silver, and platinum.
Gold is the most popular precious metal globally as individuals and governments, over thousands of years, ascribe tremendous value to the metal that reflects light like no other. Finally, gold is money, and many investors worldwide hold gold rather than other investment assets. Since gold is expensive, this causes many people to falsely believe they cannot get involved in precious metal investing unless they are wealthy.
Forms of Precious Metals
Gold comes in many forms; for this reason, gold is a good choice for any investor. Compared to other commodities, gold is more accessible to the average investor because an individual can easily purchase gold bullion from a precious metals dealer or, in some cases, from a bank or brokerage.
Precious metal bullion comes in several different forms. The most common investment in precious metals is purchasing 1 Troy ounce. In silver, you can buy 1 oz for around $28 as of August 2020. As you can see, you don't have to be a wealthy individual to benefit from investing in precious metal. The truth is, nobody can tell you which precious metal you should buy—not even us. Like any other class of assets, a portfolio of precious metals is best secured when diversified. For beginners, silver or gold may be the best place to start. Once you have at least some of each in your portfolio, many investors start integrating lesser-known metals like platinum, palladium, or copper. By diversifying with precious metals, you can make your asset portfolio less risky.
Types of Bullion Investments
In addition to choosing which metal you want to invest in, you'll also need to decide what form you want your metal to come in. There are several different options, but the leading three precious metals are rounds, bars, and coins.
When it comes to flexibility as an investment medium, bars are the clear winner among precious metals investments. The advantage of metal bars is they come in many different weights and sizes. Because of gold's high prices, gold bars start at as little as one gram. Silver bars typically start at a single ounce. For investors who want to add large amounts of bullion to their portfolios quickly, bars are a great option. Bars in the upper weight ranges can weigh up to one kilogram or more. Of course, these high-weight bars are quite expensive, but they're the best way to quickly build an extensive precious metal portfolio.
Gold and silver coins can make excellent investments because they have some unique characteristics of their own. Unlike rounds or bars, bullion coins can carry a certain amount of collector value. Newer gold and silver coins, like Canadian Maple Leaf coins, don't typically have much collector value. American gold coins minted before the elimination of circulating gold in 1933, on the other hand, can have more than half of their total price tied up in their value as collectibles. If you wish to invest in coins, it's essential to understand that there may be more to your investment than straightforward bullion value.
Rounds are popular with new investors because they tend to be relatively easy to invest in. Most rounds are made of silver or copper, but you can find a few gold rounds on the market as well. Rounds typically weigh between one and five troy ounces, making them reasonably flexible when it comes to choosing the amount of metal you want to buy at any one time. Most rounds also have beautiful designs on them, making investing in precious metals just a bit more enjoyable than it already is.
The truth is, nobody can tell you which precious metal you should buy. Like any other class of assets, a portfolio of precious metals is best secured when diversified. For beginners, silver or gold may be the best place to start. Once you have at least some of each in your portfolio, many investors start integrating lesser-known metals like platinum, palladium, or copper.
If you don't already have many investments, buying precious metals means that you're making the total of your assets incredibly volatile. You might wake up in three months to find that your life's savings have lost 50% of its value. Like every other investment, you need to be prepared.
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