More and more wealthy individuals (HNWIs) and funds prefer to invest in precious metals, mainly gold, relying on its physical and sustainable value in times where monetary currencies are exposed to over-heated economies and unpredictable political decisions.
Precious metals can be good inflation hedge and portfolio diversifier as well.
Most people are familiar with the old say “Don’t put all your eggs in one basket because if you drop the basket all the eggs could break.” The same applies for investments.
The best way to manage risk in an investment portfolio is diversification. Some people attempt to diversify their portfolio by investing in real estate and in other traditional investments, but in case of an economic downturn the price of a real estate would be badly affected. Whereas precious metals retain their value even during times of uncertainty or economic downturn.
Owning precious metals is a good way to diversify an investment portfolio because they are non-correlated assets to most of the other assets and they retain or even gain value when other asset classes decrease in value.
Many investing experts advise also to diversify with precious metals in order to have a healthy portfolio.
What are precious metals?
Precious metals are rare, naturally occurring metals of high economic value. Since they are physical commodities their supply is limited and the scarcity is the reason of their value.
In the past precious metals were used as currency, nowadays as an investment or in industrial processes. The most popular precious metals are gold, silver, platinum and palladium.
Gold is the most popular precious metal in the world. It has been always a symbol of wealth all over the world throughout the history of humanity. It is unique for its durability, malleability and its ability to conduct heat and electricity. The early forms of money was crafted from gold and ancient civilizations created jewel.
Investing in gold has been always very popular, it is the most favoured investment type within the precious metals. The value of gold is determined by the market 24 hours a day, 7 days a week.
This white metal is a unique because it is considered both, as a commodity and a currency. Silver has been always used for variety of purposes. Nowadays it is required for industrial, electrical, consumer and health related applications. The price of silver swings between its perceived store of value and its industrial metal role, thus price fluctuations in the silver market are more volatile than gold. Due to its unique role as monetary and investment metal, silver has value all around the world, regardless of economic conditions.
It is an essential industrial metal playing a major goal in the automotive industry as it is required for the production of automotive catalysts. Apart from the automotive industry it is also used for jewellery and medical implants, due to its durability. Platinum is more than twenty times rarer than gold.
Palladium (PD) is similar to platinum and offers the same industrial properties, but it is much cheaper. It is mainly used in the auto catalysis market but also for jewellery.
There are several ways to invest in precious metals:
- Gold Bars
- Gold Coins
- Silver Bars
- Platinum Bars
- Platinum Coins
- Palladium Bars
Why should precious metals be part of a saving strategy?
- Good portfolio diversifier.
- Safe investment option because they retain their values even in times of uncertainty or economic turmoil.
- During periods of hyperinflation or government upheaval, precious metals have traditionally been the safest assets classes.
- Offer unique inflationary protection, they cannot be inflated.
- Liquid and marketable investment option, it can be sold easily and fast.
- Independence from the banking system. Stored precious metals are not supervised by any financial regulator.