Today’s economy is so uncertain, and the political situation is looking more and more uncertain, too. It’s no wonder that gold prices are up. The prices of precious metals like silver, gold, palladium, and platinum tend to go up when the stock market dips, or when investors are losing faith in the stability of the government and financial system.
In hard times, there’s no better investment than precious metals. But they can also be a solid investment vehicle in good times, too. Precious metals can protect your wealth from inflation, so that you still have the same buying power in 20 or 30 years that you have now. And because the value of precious metals tends to go up over the long term, they remain a great way to store wealth.
But, like any investment, buying precious metals or precious metals investment products comes with risks. Here’s what you need to know.
Gold May Be Your Best Choice
Most precious metals, including silver, palladium, and platinum, are heavily used in industry. That means that their value is more closely tied to the performance of that industry. If something happens that affects industrial demands for those metals, the price could rise or fall accordingly – and if industrial demand for one of these metals dries up, the spot price could fall precipitously and it may not go back up.
Gold also has industrial applications, but the majority of the market for gold is driven by investment demand and the jewelry industry. A large pool of investors willing to buy gold exists, so it’s the easiest of the precious metals to liquidate. It’s also the most recognizable as a store of value and therefore the most useful in an emergency situation. If you’re looking to remove some of your wealth from the financial system and have something to fall back on should the fiat currency lose its value, then gold bullion is the best choice, with silver a close second.
You Will Need to Safely Store Your Precious Metals
When you buy bullion, you need to store it safely. For some investors, this means burying it in the backyard, or keeping it in a safe at home. If you choose to keep your precious metals at home, you risk losing them to theft, fire, or a natural disaster.
Your metals will be safest stored in a depository, and they’ll be easier to liquidate if you can show an unbroken chain of custody for the metal. However, storing gold, silver, and other precious metal in a depository comes with its own fees and costs. It can get expensive to store precious metals.
Precious Metal Holdings Can Be Hard to Liquidate
When you need to cash in your precious metal holdings, you may find that they’re not as easy to liquidate as you might like. You have to find buyers for your bullion, and that may or may not be easy. Gold is the easiest precious metal to sell because it’s the one investors are most familiar with, and it’s an investment that even novice investors feel comfortable making, thanks to gold’s long history of use as currency. If the spot price of gold is high, the stock market is tanking, and the economy is volatile, it will be a lot easier to sell your gold than it will during a good economy, because market volatility drives investors towards the relative apparent security of gold. However, you probably still can’t sell your precious metals as quickly and easily as you could sell shares of common stock or mutual funds.
You Can Use Precious Metals Investment Products to Diversify Your Holdings
Precious metals investment products include mutual funds, exchange-traded funds, and stocks in mining and streaming companies. If you want to diversify into precious metals but don’t want the hassle of holding physical bullion, you can buy some of these products instead. They pay dividends and returns, unlike physical metal, which sits around not generating any returns until you sell it. Investment products like stocks and mutual funds are also easy to liquidate whenever you want. However, they do come with the same risks that accompany any other investment product.
Precious metals can be a great investment vehicle to help you protect your wealth over time. They provide a useful hedge against market volatility and inflation. When the economy contracts and your stocks start to lose value, you’ll be glad you invested in precious metals.
