The Ultimate Guide to Investing in Precious Metals
Diversification of your investment portfolio is tough. People diversify for two reasons: to get a return at a particular level of risk, and to minimize the risk to get a favorable monetary return.
It doesn’t matter if it’s sophisticated or not. The most viable approach to diversification is investing in a range of different kinds of assets – things that aren’t the usual bonds or stocks.
If you’re looking to escape the unpredictable nature of the stock market, entering the world of precious metals is the best alternative. Precious metals like gold and silver are at a premium, they have distinctive chemical properties, and are extremely fruitful when it comes to industrial applications. Given these reasons, precious metals are the best long-lasting stores of profit.
If you just started, or a looking to enter the world of precious metal investment, this blog will be your guide.
Why Should You Invest in Precious Metals?
Precious metals, like gold and silver, are commodities able to hold their value better and for longer than dollar bills. They’re extremely popular among investors, but some argue that they come with little to no utility if they’re not being used for industrial purposes. Nonetheless, silver and gold have been the best trading commodities along with natural gas and oil. Here’s why people invest in precious metals:
Offset Losses in Inflation
When you invest in precious metals, they act as a barrier to economic instability. Presently, economic uncertainty has given a rise in precious metal investment.
As an investor, you should stay abreast of the ever-changing prices of precious metals as it forms the foundation of your investment journey. Like buying property, you should analyze how the price impacts the value of the metal in the long run.
If the price is very high, it may not be smart to invest at that time. Go through the past pricing trends, and it’ll give you a good idea about your future of investing in precious metals.
Uses of Precious Metals in Technology
The use of precious metals in technological equipment is ubiquitous. As an investor, focus on the supply and demand of the metal. The purposes of metal may change depending on where you live, but one should not overlook their practical application.
The U.S. Economy
The economy of the United States has been expanding for ten years and counting. It has been the most extended cycle of an economic boom in the history of the country. Keynesian economists, who believe in the economic boom-and-bust cycle, say that this expansion will soon be met with a contraction. When the stocks and bonds plummet, they give rise to the value of rare commodities like gold and silver.
Allocating Assets for Silver and Gold
Asset allocation for precious metals depends on the risk you’re willing to take. The advisable percentage of asset allocation for precious metal should be between 5% – 15%. If you go beyond this percentage, you may not be able to enjoy the profits that different asset classes may offer.
How to Buy Silver and Gold
How you buy precious metals is dependent on the type of asset you’re interested in. The two main types are gold bullions and ETFs (Exchange-Traded Funds) and are bought differently. Therefore, it’s best to get yourself familiar with these.
Advantage and Disadvantage of Bullion
If you buy bullion, you’ll have the entire ownership of the commodity. You can buy it in large or small amounts – depending on your investment budget. You can quickly transfer the bullion to any other person very easily.
The downside of owning bullion is that it’s taxed. If you hold it for more than a year, you are supposed to pay 28% of capital gains tax on whatever money you get from selling your bullion. But if the bullion is sold before a year, it’s taxed similar to regular income.
Advantage and Disadvantage of ETF
The advantage of EFT is that it has better liquidity, it’s easier to purchase and sell, you can buy it in small-dollar amounts – whatever is convenient for you at that time, and it trades at the net value of your assets.
However, people store physical bullions in bullion banks. It can pose a counterparty risk if obligations are not met. Therefore, investors who own gold and silver ETFs don’t have full ownership of their investment and, therefore, can’t liquefy their assets in times of economic instability.
Best Precious Metals to Invest
Gold is the top choice of precious metal investors. Gold has widespread industrial usages like electronics, dentistry, computers, glass making, etc. Above all, it maintains the top place in the market for commodities.
Throughout history, the highest amount reached was $2,076 in 1980 in February. Since then, it has fluctuated frequently – making it an ideal investing commodity among investors and gold traders. The most recent gold price, as of 18th August 2020, is $ 1,994.47.
Silver is one another popular investment choice for traders. It’s also used in energy, electronics, jewelry, and medicine. It has been a store of value since a long time. As one of the oldest currencies, it has been quite unstable. Increased demand can majorly impact the price of silver in different directions. It follows gold’s trend.
Platinum has two main usages: jewelry and catalytic converters for silencers in cars. Platinum is rarest and the most expensive commodities in the world.
The price of platinum is also related to the demand for investment. Specifically, the supply of this metal from South Africa has a massive impact on its price.
If you’re looking to invest in precious metals, choose Orion Metal Exchange. We offer you the ability to invest in precious metals through accredited accounts for retirement, third-party storage, gold and silver IRA accounts, secure private vault storage rentals, and home delivery service.