3 Essential Questions Before Investing in Precious Metals
As a novice investor, buying silver or gold may not seem as straightforward as expected. You may get lost in the pool of options, including silver and gold coins, bars and bullions and wonder which one is the safest to invest in. And not to mention the unscrupulous dealers out there who may trick you into making risky purchases.
Before dipping your toes in the world of precious metal, you must learn the ABCs of the trade. In this blog, we’ll answer the most crucial questions you should ask yourself before investing in precious metals:
What is the best way to invest in precious metals?
There are two main ways to invest in gold. You can buy physical gold, or you can invest in paper gold. While investing in physical gold means purchasing gold coins, bars, and bullion, paper gold consists of gold exchange-traded funds (ETFs).
ETFs are more convenient to buy; it’s almost like buying a share in the stock market. But ETFs don’t allow you ownership of the physical metal. This means that if you’d want to have the gold you invested in through ETFs, you won’t have a claim over it.
On the other hand, gold coins, bars, and bullions are more liquid assets that you can sell anywhere. In this regard, buying physical gold is a more sensible option.
Should I buy gold or silver?
While both gold and silver have impressive qualities, the ultimate choice between the two investments is based on three factors: liquidity, price volatility, and cost. The silver market is primarily driven by jewelry and investment demand.
However, gold has a far more liquid market that reduces its price volatility. When it comes to liquidity and price volatility, gold remains way ahead of silver. But silver costs much less than gold and therefore offers a massive investment opportunity for small investors.
Gold bars or coins—which is a better investment?
Coins generally sell at a higher premium than bars. This means that if you buy sovereign coins like the American Eagle or Canadian Maple Leaf coins from Orion Metal Exchange, you’re making a better investment than if you would’ve purchased bullion bars. Gold bars are also harder to sell back, but if you’re looking to buy in bulk, these may be suitable options.
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