- 28 Dec 2022
- Bonds
- Precious Metals
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Precious metals have long been a symbol of wealth and success. From the ancient Egyptians, who used gold and silver to craft their jewelry, to the modern-day investors who use precious metals as a form of security, these metals have had a long and colorful history. Gold, silver and platinum are all considered precious metals, each with unique properties and value.
Gold is often seen as a symbol of power and wealth; silver is known for its malleability and ability to be alloyed and platinum is used in various industrial applications due to its durability and resistance to corrosion. As a valuable commodity, precious metals have been used for centuries in jewelry, coins and even modern-day electronics. With so much to offer, precious metals are a popular investment for many.
Humans take steps to lessen danger in many areas of their life. Much care should be taken with something as significant as your retirement fund. Gold and silver are suitable investments because they may be used to hedge against inflation and market collapses, two threats to retirement funds.
When the value of most other assets falls, gold and silver tend to maintain their own. However, this is only sometimes the situation. Investors often need to account for the dangers associated with precious metals investing when seeking exposure to gold and silver.
In this writing, we've touched on the value of precious metals, risk factors that can't be ignored, the best methods to own precious metals and how you can minimize the risks involved in precious metals investing.
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Why Is Investment in Precious Metals Beneficial?
Investment in precious metals is known to be beneficial in more ways than one. Precious metals are often called collector's items. Though they have been used for centuries in making jewelry and money, their value as investments has also grown with time.
Inflation Hedge
Gold and silver have been used for centuries as a medium of exchange and a portable form of wealth. Though the value of these precious metals may fluctuate at times, it is believed that they are best suited as a hedge against inflation and market crashes. According to Metals Economists, gold has retained its value better than any other asset class throughout history, including all paper assets such as stocks.
Ability to Invest in Physical Assets
While investing in precious metals may not be as exciting as picking stocks, it is a safer option than the stock market, which can increase your wealth even more. Investing in precious metals allows you to invest in some of our planet's most sought-after physical assets.
Diversification
A well-balanced portfolio should include stocks, bonds, cash and other investments. However, adding precious metals to that list can also be an excellent way to diversify an individual's portfolio further. This is because gold and silver have proven to be safer investments in times of market turmoil and are less correlated with other investments than some traditional investments are.
Potential to Increase in Value
The potential for investment in precious metals can be substantial. The value of many gold and silver coins has increased significantly over the years. Many people are attracted to precious metals because of their potential for increasing in value.
For example, investing in gold bullion coins such as American Eagles or Canadian Maple Leafs allows you to purchase an asset with little risk and to benefit from a market that can appreciate at over 7% per year.
International Protection
Gold and silver can also be a reliable hedge against inflation and a mean to store wealth in times of uncertainty. For this reason, gold and silver are trendy among investors in emerging markets who need international protection against inflation, political instability and currency devaluation.
Best Ways to Own Precious Metals
Investors have many options for gaining exposure to precious metals — bars and coins, ETFs, closed-end funds, precious metals certificates and digital precious metals. Below are a few of the best ways to get exposure to precious metals:
Gold Bullion
Gold bullion coins are excellent if you want exposure to precious metals without accumulating a large investment. These coins can be considered safe-haven assets that have increased in value over the years. For example, American Eagles and Canadian Maple Leafs have appreciated by a greater percentage in the past 30 years.
You can purchase gold bullion coins through your local jeweler or mint and redeem them for their intrinsic value, such as face value or melt value.
Gold and Silver Mining ETFs
With gold and silver ETFs, you can invest in precious metals with a minimum amount of initial capital but no need to buy physical bars or coins. Before deciding on an ETF, review the performance of the holdings since their creation to gauge their potential performance.
Gold and Silver Bars
Gold bars are often referred to as coins, as they have a greater weight, while silver bars are also an excellent choice because they offer investors other metals in the form of silver with their gold bullion bars. Like gold bullion coins, bars and coins are also always guaranteed by the issuing mint or government.
Precious Metals Certificates
These certificates represent precious physical metals held in a depository which is the government of a country. They are primarily issued in gold, silver, platinum and palladium. Gold and silver certificates are reputed to be safe haven investments due to the history of large increases in their value over time and their limited supply.
Contracts for Difference (CFDs) on precious metals
These derivatives allow people to speculate on the value of a precious metal without buying it. CFDs are also appealing because they allow you to purchase precious metals without having them physically.
The Disadvantage of Precious Metal Investing
Despite the potential benefits of investing in precious metals, numerous factors can make investing in precious metals a high-risk venture. If you are interested in investing in precious metals, you should know the risks associated with this investment.
One downside of investing in precious metals is that prices are volatile. You don't have control over the ups and downs of the market – so if you buy at too high a price or sell when prices are down, your investment could also go down.
Another thing to consider is that gold prices are based on supply and demand. While the world's economy grows, production increases and prices rise. But even with this growing supply and demand, the price never seems to go down. The cost of gold will continue to grow steadily and might even go up more than it did in the past.
Gold prices are also beyond your control. If you buy gold, you could lose your investment if someone steals it. Even if you own physical gold and stash it somewhere, there's still a chance that the government will confiscate it or the person who has it will steal it from you.
Minimizing Risk While Investing in Precious Metals
There are ways to protect your precious metals holdings against volatility and market swings.
Taxation Risk
Choose your precious metals merchant carefully to avoid breaking the law on trusted third parties and IRS storage rules. The IRS considers bullion and most ETFs tracking precious metals to be collectibles, making the maximum long-term capital gains rate on these investments 28%.
Contributing to a 401(k) or an IRA allows you to delay the recognition of capital gains from investments in precious metals until retirement (IRA). However, to be included in a tax-advantaged retirement savings account, they must be stored and vaulted by reliable third-party custodians.
Storage Risk
Storing precious metals in a safe deposit box or bank vault might leave you vulnerable to lose or theft, as well as the possibility of your funds becoming entangled in the financial system. Ensure your gold or silver custodian provides full FDIC insurance on metals held and that the vendor employs a third-party nonbank trustee certified by the IRS to reduce the possibility of loss during storage. Those who choose to keep their gold and silver at home should do so discreetly and privately insured.
Liquidity Risk
The use of precious metals like gold and silver as currency varies widely. Compared to stocks, precious metals stored in a vault require more time to access, inspect and sell on the open market. In contrast to conventional paper assets, this procedure might take many days to complete.
Choose a precious metals supplier who allows you to store your metals digitally and immediately access your funds. Funds are typically available for withdrawal from an online vault within one to three business days after a transaction has been concluded.
Counterparty Risk
You are taking on counterparty risk if you don't invest in actual gold and silver. That is, the possibility that one party to a contract would fail to uphold its end of the bargain.
When you contract with a vendor or brokerage to purchase precious metals ETFs or mining stocks, you invest in precious metals without actually owning bullion. While not having to worry about storage is an attractive feature, the possibility of default must be considered when dealing with this form of precious metals exposure.
Gold stocks and ETFs are valuable investments, but they also pose a risk of loss because they are the responsibility of a third party. However, there is no counterparty risk with gold or silver bullion. Physical precious metals are among the few asset classes immune to this danger.
Best Precious Metal Companies to Help You Minimize Risk
Several companies deal with the trading of precious metals. We recommend that you work with one of these companies to invest in precious metals:
#1. Goldco
Goldco is an excellent precious metal company to help you minimize risk. With over 10 years of experience, Goldco has established itself as a leader in the precious metals industry. Their team of knowledgeable professionals can provide you with the best advice and guidance to ensure your investments are secure.
Goldco offers a wide range of services, from retirement accounts to physical gold, silver and other precious metals. They can also help you diversify your portfolio by providing access to stocks, bonds, futures and options. With their expertise and resources, they can provide you with comprehensive solutions that can help you manage and reduce the overall risk of your investments.
Goldco provides personalized service to each client, helping them achieve their financial goals. They aim to ensure you receive the most benefit from your precious metal investments.
Augusta Precious Metals is an excellent option if you want to invest in precious metals with as little risk as possible. They provide several commodities, including precious metals like gold, silver, platinum and palladium. All of their items are held to the greatest standards, so you can buy with the assurance that they won't depreciate over time.
Advice on portfolio diversification, retirement planning and portfolio security are just some of the many services provided by Augusta Precious Metals. Their team is well-versed in the ins and outs of the industry and can advise you on how to get the most out of your investment with the least hassle. They also offer professional advice on safeguarding and ensuring your holdings of precious metals. You can feel safer and more at ease knowing this.
In addition to providing affordable services and goods, Augusta Precious Metals also stands out for its low costs. Thanks to their vast stock, you may quickly receive the things you need at reasonable prices. In addition, your financial information is safe because they provide a secure online ordering option.
Regarding reducing the potential for loss when purchasing precious metals, Augusta Precious Metals is a top pick. They make it simple to build a safe and lucrative portfolio by providing a large range of options and helpful services at reasonable pricing.
American Hartford Gold is among the most dependable names in the precious metals industry when protecting your wealth. This storied firm has provided investors with a simple and risk-free means of acquiring actual gold, silver and other precious metals for decades. All their items are manufactured using premium metals and go through stringent quality control checks to guarantee they are up to par.
American Hartford Gold guarantees you will receive the highest quality gold by partnering with only the most trustworthy refineries. They have a wide variety of gold and silver coins and bars to pick from so you can find the perfect investment for you. And if you'd instead shop from the comfort of your own home, they also offer an online store.
You can rely on their competent and pleasant customer care staff to answer your questions and point you in the right direction. Plus, they provide affordable prices and a variety of storage choices to protect your assets while providing you with convenient access. When you invest in American Hartford Gold, you can have confidence that your money is being held in a reliable and stable institution that will help you safeguard your future.
#4. Birch Gold Group
Birch Gold Group is the best choice if you're seeking a trustworthy precious metals dealer that will assist you in reducing your exposure to potential loss. Birch Gold Group has been around since 2003 and is well-recognized as a leading provider of precious metals in the USA. Gold and silver storage and buying bullion coins and bars are just a few of the investment options they provide.
Bullion bars, numismatic coins and non-reportable collectible coins are just some of the gold and silver offerings from Birch Gold Group. They provide safe and affordable choices for storing gold, silver and other precious metals.
Birch Gold Group is staffed by experts in precious metals, which can guide you in your investment and portfolio management decisions. They care deeply about satisfying their clients and will collaborate with you to maximize the return on your investment. Investing in precious metals might be risky, but with the guidance of their team of specialists, you can choose the right product for your situation.
Birch Gold Group is here to help you achieve your investing objectives, whether you're a novice investor or an experienced one wanting to diversify your holdings. Birch Gold Group is the best option for limiting risk when investing in precious metals due to its knowledgeable staff of financial specialists, extensive product offering and safe storage options.
#5. Noble Gold
Noble gold is a leading online precious metals dealer that provides services for those looking to invest in gold and silver. They also offer options for investors interested in physical, paper, gold and silver investment products. They aim to help you protect your hard-earned money by recommending the best precious metals investments for your specific needs.
Noble gold can help you pick from various types of gold and silver products. You can also benefit from their expert advice regarding storing your precious metals. They provide a vast selection of gold and silver coins, bars and even rounds. You can buy with the confidence that you will be served by a trusted company that is knowledgeable in the field.
Noble gold provides a safe way to access physical gold and silver, which has been getting harder to purchase due to recent regulations. Their online store is simple to navigate and provides quick access to affordable gold and silver products from trustworthy refineries. You can also find additional information about their product offerings on their blog.
Final Verdict
Investing in precious metals can be the right choice for those who want to protect their resources. You can build a secure, wealthy portfolio with precious metals with careful planning. Only companies that uphold high standards of integrity can ensure you receive the best value in precious metals with the least risk. Investing in valuable metals is expensive but can be well worth the expense when considering long-term rewards.
