Precious metals like gold, silver, palladium and platinum have been known for being highly valuable for many years. Today, they are a very attractive form of investment, as their value has never gone down. Many investors find security having them in their portfolios. However, investing in these precious metals is not easy. Beginners should have the knowledge and skills to handle these investments in order to make them profitable.
Gold
Gold is the most popular among precious metals. It is highly valuable due to it being durable, malleable and an electrical conductor. Gold is not only used in jewelry and currency. It is also utilized in many applications such as electronics and dentistry.
As an investment, gold is seen as very stable. In times of economic, political and social crisis, many investors still opt to buy it as a safe haven. While paper currency depreciates, gold maintains its value. Additionally, gold investment allows individuals and companies to protect their portfolio against drastic changes in other assets like bonds and stocks.
People may invest in gold through buying gold jewelry, gold bullion, gold mutual funds, gold ETFs, gold company stock, gold coins and gold futures. Most investors opt for buying gold coins, bullion and jewelry rather than buying things like shares from a gold mining company.
Silver
Silver has now become important as both an industrial commodity and a financial asset. Investors have now seen that silver’s value appreciates as time goes on. Today, countries like Canada, Germany and the United States produce silver coins and bullion for investors.
The demand for silver as an investment and industrial metal keeps on increasing. In fact, more and more applications need silver. This includes everything from electric connectors to silverware and digital cameras. At present, Mexico is the largest silver-producing country. However, there has been a significant decline in silver mining in the last ten years. Scrap recycling is now a major source of silver that mostly comes from jewelry, photographic materials and silverware.
Experts say that there is a silver shortage mainly because most of it is already above ground and kept in vaults. This is why many investors tend to hoard silver products like coins and bullion as the condition will most likely remain unchanged or get worse.
Platinum
Platinum investment in the form of bullion and coins has also become very popular these days. It is also traded globally on commodities markets. Its value tends to be higher than gold mainly because of its rarity. Ten tons of raw ore have to be mined on order to come up with an ounce of 100 percent platinum.
In addition, this precious metal has a lot of industrial applications. Platinum jewelry is in demand, and this is especially true in Japan. It is also used in petroleum and chemical refining catalysts, dentistry and electronics. This makes it one of the most popular investment alternatives to currencies, stocks and bonds. Russia and South Africa are the leading platinum producers.
Palladium
Palladium is commonly used as a platinum alloy. It has many industrial uses and has become known as an investment. However, its value tends to be lower than other precious metals like platinum, silver and gold. Russia is the major palladium producer today. In fact, the country supplies about 55 percent of all palladium. Other sources are South Africa, Australia, Brazil, Canada, Finland, the United States and Zimbabwe.
Palladium is used in semiconductors and other electrical components. It can also be used with gold for dental alloys in order to produce a lighter color and enhance its anti-corrosion properties. Jewelry can also have small palladium content.
Other Precious Metals
Rhodium, ruthenium, iridium and osmium are other precious metals. However, they are rarely used for investment. They are commonly used as alloys in jewelry and for industrial purposes. They are not available in bullion form.
Important Elements in Precious Metal Investment
Investors should be careful when buying precious metal in the form of bars, rounds and bullion coins. The following are some elements to look out for.
· Precious Metal Content
Potential precious metal investors should know that the metal content’s measurement is expressed in troy ounces. However, some mints use grams instead of troy ounces.
· Metal Purity
Knowing the metal purity is paramount when trading. The metal’s purity should be found on the coin. Some coins have .999 silver, but the purest silver coins have .9999.
· Coin Condition
Grading is different with every type of precious metal. Investors should be aware of the conditions that may affect grading. Some items may be graded as circulated. This means the coin or bar has scratches, toning or dirt on its surface. If the wears and tears are excessive, the item’s features may be difficult to see. With this, they will have lower value because they contain less metal. On the other hand, uncirculated means there is only slight damage on the surface. These precious metals have higher value. Investors should be meticulous when choosing the precious metal they want to buy to make sure they gain reasonable profits in the future.
· Brand or Hallmark
Government-minted precious metals may have good value. However, investors should also not ignore those minted by private entities. This is especially true if they come from reputable refiners. When buyers find out they are minted at well-known and trusted sources, they won’t think twice about paying a high price. These precious metals are great investments.
· Authenticity
Precious metals like silver, gold, platinum and palladium in coin or bullion forms have the highest value when they have Assay certification or have been graded by reputable organizations like the Professional Coin Grading Service and the Numismatic Guaranty Corporation.
Buying Precious Metals for Investment
Before buying any precious metal, the investor should master the ins and outs of the market. There are different precious metals that come in the form of coins, bullion or certificates. They have to determine which among these investment options suits their needs before they let go of their hard-earned money.
· Timing
Experts recommend proper timing when buying precious metals for investment. Investors should be aware of the market conditions through studying precious metal technical analysis and charts. Doing so will allow them to determine the right time to invest in order to make profits in the future.
· Spot Price
Investors should also be familiar with the spot price. A great choice is the item with a price that is close to the spot price. The lower it is, the better the will often investment returns. However, prices that go 10 percent beyond the spot price are not excellent picks.
· Sources
Precious metal dealers can be found online and offline. Alternatively, investors may find them in their local area. Make sure to compare each dealer’s prices and terms. Most importantly, they should be reliable and licensed with many years of experience in the business. Monex.com is among the reputable online dealers.
· Shipping and Insurance
Investors should make everything clear with the seller about their shipping and insurance terms. It is best that they buy insurance to make sure that they will never lose their money. This is especially true for those who purchase items worth $50 or more. Additionally, they have to give clear instructions to the seller on where it should be delivered and who will receive it.
· Payment Options
Investors should avoid sellers that do not accept credit card or Paypal payments. They are more likely to cause trouble. Paying through Paypal is very convenient and safe. If buyers do not receive the items, they get their money back. Buyers must always check payment options before committing.
· Exit Strategy
Just like any other forms of business and investment, precious metal investors should have an exit strategy in place. Many investors prefer precious metals investments in bullion, coins, bars and jewelry because they can liquidate them easily. There are many ways they can sell these items that include eBay, auction sites, clubs, shows and collectors.
Gold, silver, palladium and platinum are definitely great investments. However, they may not make an investor a millionaire in just a few months or even years. Many investors wait ten years or even longer before they gain profits. Investors should bear in mind that they have to use a significant amount of money for purchasing and even storing their precious metals. This is because these metals easily react to undesirable environments like extremely high and low temperatures and humidity. These elements may trigger some chemical reactions on their surfaces that may lead to a reduction in value. With this, investors should prepare for storage such as safety deposit boxes at the bank to make sure that they are safe from any harm including burglars.
Precious metal investments may not be for everyone. Aspiring investors should make a careful evaluation of themselves before they commit to this long-term investment. The smartest thing to do is to treat these investments as a lucrative hobby and not as a source of living.
Reference Sources:
- http://www.investopedia.com/articles/basics/09/precious-metals-gold-silver-platinum.asp#axzz2LVd6XBGK
- http://fidelitrade.com/UploadedFiles/articles/investment_metals.pdf
- http://reviews.ebay.com/Investing-in-Precious-Metals-Bullion?ugid=10000000000938000