Are you too planning to begin your investment stint? Have you thought of starting with physical metals? Well, if you haven’t, we have a lot of reasons why you should! The number 1 reason behind investing in precious metals is it keeps your portfolio shock-proof.
By portfolio, we mean not just your stocks, but your other assets as well such as real estate, bank deposits, etc. Many savvy and amateur investors use their gold and silver investments as a lifeboat. If you are considering entering the precious metal market, you may follow these simple tips and tactics.
1. Physical gold/silver- bars and coins
The number 1 way to investing in precious metals is through gold and silver bars and coins. This is the safest and reliable way of investing. The only problem is where to keep these assets; in most cases, it is the bank vaults.
Physical gold and silver can help you in times of economic crisis. When there is an economic recession or slowdown, these metals come to the rescue. During the Greek and Puerto Rico crises, banks turned away their long time customers. Even the ATMs stopped functioning for lack of cash. However, owners of gold and silver coins and bars did not face any problems; they traded their assets with cash and life was pretty normal for these investors. When you buy gold or silver physically:
- You don’t have to worry about purity issues
- These assets are legal as they have been purchased in an open market
- Gold coins issued by the government are legal tenders
- They can’t be faked
However, prices of gold and silver bars and coins are higher than spot market prices. Click here to get up to date information on gold prices.
2. Gold and Silver ETFs
You can buy these precious metals via ETFs or Exchange Traded Funds. This way, you don’t have to purchase these metals; trading is entirely virtual. You can buy or sell your precious metal through shares just as you would in case of any regular stock exchange.
Another great way to invest and trade in gold and silver is through options and derivative trading. In this market, you enter into a contract with another trader; this contract is based on the future price of gold and silver. This is speculation, and both of you are guessing what’s going to be the future price of your precious metal. Depending upon the outcome, you can either make money or post a loss. We’d recommend that you enter this market only if you have a high-risk appetite.
4. Trading in gold mining company stocks
Another way of making money in physical markets is through buying shares of mining companies. These companies might be in gold, silver, platinum, zinc or copper mining. Please note that the share price of your company may not necessarily rise in tune with the price of your metal. Share prices vary according to several factors like government policies, environmental issues, currency movements or the global economic climate.
Now that we’ve conveyed how to invest in gold and silver let’s understand the valuation of the former. Most of the gold that is mined is used in making bars, coins, and jewelry. Just 15% of the gold on this planet has industrial applications. The price of gold depends upon several factors. The most important factor is the current interest rate. If the rate of interest is high, it negatively impacts the price of gold. More people will put their money in banks than buy gold. Gold prices also depend upon inflation, global economic climate, and prevailing government policies.