Today we will discuss investments in popular precious metals.
3 rules for investing in precious metals
Before delving further into the topic, let’s formulate 3 rules of how to invest in precious metals and stay in the black:
Rules for investing in precious metals to stay in the black.
- Invest in metals only for the long term. Be patient – do not expect quick profits even after 2-3 years, as the cost of precious metals is growing quite slowly. But in 10-15 years, such investments are able to outstrip inflation, save investments and bring tangible income.
- Analyze market conditions before buying. For example, during a crisis, the price of gold rises, and when the economy stabilizes, prices will go down again. Therefore, do not succumb to general panic and rush to buy. It may be worthwhile to be patient for a while in order to invest in precious metals at a bargain price.
- Don’t put all your eggs in one basket. Diversify your portfolio and allocate no more than 10% to investments in precious metals. Even if you choose such reliable metals as gold or silver.
What is the best metal to invest in?
If you decide to invest in precious metals, then in addition to gold, it can also be silver, platinum, palladium, copper. At the same time, gold and silver are reliable investment instruments, while industrial precious metals such as platinum, palladium, copper are profitable, since their value directly depends on the market for the products of this industry.
For example, in the period from 2015 to 2019, the price of palladium increased by 138.3%, while the price of platinum fell by 20.0% at the same time. The reason is the scandal with the Volkswagen concern in 2015. When delivering cars with diesel engines in the United States, it turned out that the results of tests for harmful emissions into the atmosphere were faked. Then a number of Volkswagen diesel cars were banned from sale in Switzerland, the USA and other countries. And what about platinum? The fact is that platinum is used in diesel car catalysts to purify exhaust gases. Therefore, the ban led to a decrease in demand from automakers for this metal.
At the same time, amid the diesel scandal, demand for gasoline and hybrid cars, which use palladium in catalysts, has increased. Hence, such a sharp increase in its value.
The example shows how unpredictable the behavior of the market is, since the cost of industrial metals is strongly influenced by world events. Therefore, they are not suitable for saving money. But this does not mean that platinum, palladium or copper should not be in your investment portfolio.
I will not tire of repeating that the filling of the portfolio depends on your goal and the timing of investment: industrial metals can easily enter the percentage of profitable instruments. Do not forget about diversification and invest wisely – then market fluctuations will not scare you.
As a rule, precious metals on the Russian market are sold in grams. However, quite often on the stock exchange you can find such a value as a troy ounce. This measure of weight is used by banks and jewelers to weigh precious metals and is equal to 31.1034768 grams.
Is it profitable to invest in gold?
As soon as investors begin to study the precious metals market, the first thing they encounter is gold assets and questions about how to invest in gold profitably.
Gold is a precious metal with a long history. Its deposits are rare and sometimes difficult to access, so it is one of the most expensive metals.
You can invest in gold through:
- gold bars;
- golden investment and memorable moments;
- trading on the stock exchange: betting on the fall/growth of gold or the purchase of shares in gold mining companies;
- gold mutual funds or ETFs;
- opening an unallocated metal account.
Gold can be called a profitable investment, but only in the long run. Often, newcomers, in an attempt to earn more, try to speculate in precious metals on the stock exchange or in private. Only the daily fluctuation of the price of gold in the market scares investors, and trading on emotions leads to losses or even a complete loss of investments. Therefore, you should not invest in gold if you are not ready to wait. This is a reliable tool that will show itself to the fullest only over a multi-year period.
The bank branch is the best place to buy gold for investment if, like me, you choose to save in the long run. Buying from hands or in pawnshops threatens with a fake, and speculation on the stock exchange – with debts and loss of investments.
And no matter how ideal investing in gold may seem, they also have pros and cons:
Reliable protective tool.
A universal currency that can be bought and sold in any country.
Stable growth in value in the long term.
Profits will have to wait for several years
Difficulty in realizing physical gold: bars or coins.
Gold in physical form must be stored somewhere
Investment in silver
Silver is the second most popular precious metal among investors. Silver is used in jewelry, medicine, solar technology, automotive and many other fields. Silver mining is estimated in hundreds of tons, but it does not become less valuable from this. On the contrary, in recent years the demand for this precious metal has increased several times.
The cost of silver per gram is several tens of times lower than the cost of gold. It is this availability that attracts investors and speculators to the silver market. You can invest in this precious metal using:
- depersonalized metal account
- silver bars and coins;
- trading on the stock exchange;
- shares of silver mining companies;
- silver mutual funds and ETFs.
The price of silver roughly follows the dynamics of the price of gold. Therefore, during a crisis, investors also try to invest in silver assets.
Investments in silver carry the same prospects as in gold. It is a reliable savings tool.
Gold vs silver: which is more profitable to buy?
Before investing in gold or silver, decide what kind of goal you want to achieve: to save or earn?
- If you want to save money in the long run, then you should give preference to gold. This precious metal is growing too slowly to make money on it, and the high cost increases the entry threshold. Not everyone is ready to immediately invest hundreds of thousands of rubles in gold assets – it is more convenient to do this gradually, in even payments.
- The earning potential of silver is higher than that of gold. The low cost of an ounce of silver lowers the investment threshold, and the demand for the precious metal in industry and innovative technologies makes it potentially more profitable. But for the same reasons, investments in silver can become unprofitable, since it is more subject to market influences than gold. If you want to try to make money on speculation, you can start by buying a small amount of silver on the exchange. But you shouldn’t get carried away with it.
And if you want to make your life easier, try social trading services like HeartBeat and eToro. These services allow shifting gold and silver trading onto the shoulders of more experienced players.