Silver and gold are precious metals that are well recognized and coveted since ancient times. Even in current times, these metals are still considered to be very good investments.
Any well-rounded investor is sure to have them in their portfolio. Visit here https://www.investopedia.com/terms/p/portfolio.asp to learn more about what a portfolio is all about. While you may know that an investment in precious metals is a great idea, you may be confused as to which one you should invest in.
There are several ones to pick from like platinum, silver, and gold. If you are new to this whole business, then keep reading to find out more about these metals. This article also helped you decide whether or not to make investments with them.
The price of this precious metal alternates between its feature as a valuable metal and its industrial use. Due to this, silver prices fluctuate way more than gold prices. So, despite silver being right next to gold as something that is hoarded, its supply and demand equation due to its industrial use puts a big influence on its price.
This equation fluctuates with innovations like:
- Silver had a dominant role in the industry of photography (photographic films that are silver-based). This, however, was eclipsed by digital cameras.
- The use of silver in superconductor applications, microcircuit markets, and batteries.
However, no one knows for certain how much developments like these can affect silver’s non-investment demand. Yet, one fact still stands: the price of silver is affected by its industrial use and not just as a value store or a fashion piece.
Next on our list is the chief of all precious metals: Gold, reigning over the top countries on the investment purpose. This is known uniquely for being able to conduct electricity and heat, its flexibility, and durability (it does not corrode or rust). It is used industrially in both electronics and dentistry. But for this article, we will be considering it as a currency.
Gold’s price is often based on the market which operates 24/7. You can read this GSB Gold Standard Group review to learn more about the gold market. The price is also not so impacted by the supply and demand law. A major reason for this is that the gold that is above-ground and hoarded far outweighs the mine supply.
What we mean by this is that when that hoarding gold decides to sell, the price of the metal drops. But when they choose to buy, the supply is fast absorbed; this will drive the price even higher.
There are several reasons why people choose to hoard, some of these reasons include:
- Financial Concerns: If there is any uncertainty in the political and economic environment, many people see gold as a sort of haven that is sure to preserve value.
- Political or War Crises: Situations like political or war crimes have been known to drive people into full hoarding mode. People can convert their lifetime savings to this portable yet secure currency and save them until they need to trade it for shelter, foodstuffs, and safe passage away from the danger zones.
- Inflation: When real estate, bond, equity, and other real rates turn negative, gold can become that asset which people flock to because of its ability to preserve its value.
Just like silver and gold, platinum has a 24/7 global market. It is much rarer than gold, so, it often is much more valuable than gold when there is political and economic stability.
Other things that influence its price include:
- Like silver, this is considered more for its industrial uses. The demand for it is its use for automotive catalysts. This reduces emissions’ harmfulness. Jewelry is another factor that greatly influences its demand. Next to this, we have chemical and petroleum refining catalysts. Finally, the industry of computers is responsible for the rest of the demand.
- Mines for this item are concentrated in just two countries, Russia and South Africa. Due to this, there is more chance for some cartel-like actions that would artificially increase the metal’s price.
- Since the auto industry heavily relies on metal, the price of platinum is determined a lot by auto production numbers and sales. However, in 2009, Japanese and American auto manufacturers started using palladium (platinum’s less expensive and more reliable sister).
Anyone thinking to invest in platinum has to properly consider these factors before they invest. Platinum has the reputation of being the most unstable precious metal.
This is not so known; however, it has a lot of industrial uses when placed in comparison with other metals on the list. It is silvery but shiny and is often used for several manufacturing processes, especially for industrial and electronics products.
You can read this to learn more about palladium. It is also used in medicine, jewelry, dentistry, groundwater treatment, and chemical applications. Mines in South Africa, Canada, Russia, and the U.S are known as major suppliers of this metal.
Should You Invest in Precious Metals?
One thing that makes these metals valuable is their intrinsic value, they do not get inflated, and they do not carry credit risk. You cannot simply print or make more. Also, they offer insurance against military, political, and financial upheavals.
When placed next to some asset classes like bonds and stocks, these precious metals offer low or no correlation. What this means is that having one of these (even if the percentage is small) in your portfolio, can reduce risk and volatility.
However, there are some risks attached to it, but can you name any other investment that doesn’t come with risks? A major risk you may face when you invest in any precious metal is the price drop. So, should you invest in them? The decision is solely yours. But whatever you decide, ensure you properly consider the risks and your goals.
If you want to invest in any metal we have discussed, make sure that you do not just jump in without properly doing your research. You can use their volatile nature to gather wealth. But, if you leave your investment unchecked, it potentially may result in a massive loss.