Have you ever thought about introducing precious metals to your investment portfolio? The preciousness of these metals comes from their rarity and limited annual production.
Investors are still provided with various opportunities when it comes to such valuable investments, such as investing in gold, silver, platinum, and palladium. Each of these assets is unique in its properties, volatility, and protection from risk.
There are numerous precious metal dealers offering their services to investors. Make sure you read this Schiff Gold review to get familiar with their services.
We hope the following investment guide to such commodities is of great assistance to any potential investor.
Gold has earned global respect for its value and rich history, encouraging people from different cultures to invest in this commodity for a variety of reasons. It provides excellent financial cover in times of macroeconomic and geopolitical uncertainty. Gold’s price soars in response to unfavorable events that reduce the value of stocks, bonds, and other paper investments.
While its price has demonstrated short-term volatility, gold has managed to maintain its value in the long term. The one-of-a-kind properties of this asset have been valued for ages, such as its resistance to corrosion, malleability, ductility, heat conduction, etc. Gold has acquired the role of a holder of purchasing power during inflation, unlike currencies, which depreciate in value.
High-inflation times have caused a crash in the stock market but no harm to gold. Consequently, it’s an excellent portfolio diversifier when currencies start losing their value. While this metal performs remarkably well during inflation, it also offers protection against deflation, referring to a period when prices drop, and the economy is overburdened by debt.
Moreover, gold is known to hold its value when geopolitical uncertainty rules the world. Hence, it’s rightfully called the crisis commodity. Once world tensions start to rise, people look for safety in this asset. The Russia-Ukraine war has once again proven the superiority of gold over other assets. The supply of this metal faces constraints, as it takes between five and ten years for a new mine to enter production. Read more about how gold shines as the geopolitical crisis intensifies.
These supply constraints provide a boost to the gold’s price. In the meantime, the demand for this metal is on the rise as well. An increasing number of investors see gold as an investment opportunity by allocating their funds to ETFs and bullion. Investors are advised to combine this asset with stocks in their portfolios for the purpose of reducing risk and volatility. It’s worth noting that gold has a negative correlation to real estate, stocks, bonds, and other assets.
Another precious metal that’s worthy enough to be included in your investment portfolio is silver. It demonstrates higher volatility than the yellow metal, as it has two roles responsible for the price swings. On the one hand, it’s considered a store of value. On the other hand, it has a major role as an industrial metal.
Furthermore, silver’s price is influenced by both investment and industrial demand. The latter fluctuates with the rise of new innovations. Nowadays, many electrical appliances, industrial items, and medical products contain silver. It’s used in the production of computers, mobiles, digital cameras, batteries, and other items. The industrial demand for silver isn’t likely to diminish even if its price rises dramatically, as this metal is only used in small quantities in every product.
Silver has extensive use in the solar industry due to the global trend of reducing carbon emissions to a minimum. Hence, countries looking to increase their capacities for renewable energy production are likely to use more silver.
This metal is much more affordable for precious metal investments, which enables investors to take advantage of its affordable price while protecting themselves against the destruction of the purchasing power of currencies. This article, https://geology.com/articles/uses-of-silver/, elaborates on the uses of silver in electronics, medicine, jewelry, and coins.
Another attractive precious metal to introduce to your investment portfolio is platinum. It’s much rarer than gold, which explains its higher price during periods of political and market instability. The platinum quantity extracted from the ground on an annual basis is much lower than the yellow metal. Over seventy percent of the platinum on a global level originates from South African mines, where miner face huge extraction challenges.
An interesting fact about platinum is that it’s rarely extracted in isolation. It’s usually mined along with other metals like copper, chrome, and nickel. Hence, the deposits found underground have to be refined until they become completely pure, which explains why the process is so complex and costly. Just like silver, platinum is viewed as an industrial metal.
The greatest platinum demand originates from automotive catalysts used in the reduction of harmful emissions. The rest of the use is reserved for jewelry, computers, fertilizers, pacemakers, chemical and petroleum catalysts, etc. In general, platinum prices are dictated by auto sales. Normally, a portion of platinum is used for the production of platinum coins and bars for investors.
Many investors bring balance to their investment portfolios by introducing platinum. The demand for bars experiences an increase when gold soars in price. Nevertheless, it’s worth noting that platinum is the most volatile precious metal.
Palladium is considered the least popular of the above-mentioned precious metals. It has numerous industrial uses in fields like medicine, dentistry, jewelry, and others. The largest part of the supply of this rare asset originates from mines in Russia, the US, Canada, and South Africa. Palladium prices are mainly influenced by the auto industry demand, as this metal is used in the production of catalytic converters.
Price fluctuations are also common when geopolitical concerns arise. Since almost eighty percent of the supply comes from Russia and South Africa, any potential supply interruptions cause fluctuations. For instance, the momentary sanctions against Russia are to blame for the price movements.
The bottom line
Precious metals offer much-needed portfolio diversification.
Any choice is worth the investment!