How to invest in precious metals (2024)?
If you are going to invest, you can choose from many interesting investment products. One form of investment that is currently very popular is investing in precious metals. Precious metals are pure metal elements that have great economic value. In this article, you will learn how to invest in precious metals such as gold and silver.
How can you invest in precious metals?
There are several ways in which you can invest in precious metals. You can choose to actively trade in the value of precious metals. It is also possible to invest in shares or investment funds. Finally, you can also buy precious metals yourself.
A good party to buy shares in precious metal companies is eToro. At eToro, you pay low transaction fees over your transactions. This allows you to achieve a positive return even with a small investment. Use the button below to open a free account with this broker:
Active trading in the price of precious metals
You can trade in the price developments of precious metals using derivatives. Derivatives are contracts on the price of a commodity. This means that you do not buy or sell precious metal directly. With a derivative, you can speculate on both increasing and decreasing prices.
By actively speculating on the price of a CFD precious metal such as gold or silver, you can react to the latest market conditions. A good party to try this way of trading is Plus500. At Plus500 you can try CFD trading completely free with an unlimited demo. Use the button below to instantly open a free demo account:
Precious Metals Fund
It is also possible to invest in precious metals indirectly by joining an investment fund. Several funds closely follow the prices of precious metals. Please pay close attention to the management costs of a fund. Management costs can significantly reduce the return.
The best party to trade precious metals through a fund is DEGIRO. At DEGIRO you pay no transaction costs when you invest in funds listed within the core selection.
Use the button below to directly open an account with this broker:
Buy precious metals
It is also possible to buy precious metals physically. Even though precious metals do not yield any interest, it is still a very popular investment product. Precious metals are especially popular in times of crisis. This is because precious metals preserve their value. The value of a precious metal is independent of inflation or the success and failure of a company.
This makes precious metals especially popular among investors in times of recession. The value of the precious metal is not affected by an unstable economy. This gives you more peace and security in turbulent times.
However, buying precious metals physically can be a hassle. You will have to store the precious metal somewhere. You will also have to protect your property against theft. This makes it essential to conduct research before you decide to buy precious metals!
Investing in precious metals manual
What do you want to know about investing in precious metals? Navigate directly to the appropriate section in the article:
- Types: in which precious metals can you invest?
- Advantages: why should you invest in precious metals?
- Disadvantages: what are the disadvantages of investing in precious metals?
- How much should you invest?: what percentage should you invest?
- Pricing: how does the price of a precious metal come about?
In which precious metals can you invest?
There are several precious metals in which you can invest. For example, you can invest in gold, silver, platinum or palladium. In this part of the article we briefly discuss these precious metals.
Gold
Gold is still the best known precious metal and very popular among investors. Investing in gold can turn out very well during an economic crisis. Some investors buy gold to protect their portfolios against declines. When shares fall in value, you often see that a precious metal like gold rises in value. Gold can then act as a protection against a falling stock price. Would you like to know more about investing in gold? In our article about investing in gold you can read everything you need to know:
Silver
Silver is also a popular investment. The price of silver does not always move together with the price of gold. This is because silver also has a clear industrial application. A big advantage of investing in silver, is the fact that this precious metal is a lot more affordable. This makes it possible to consider an investment in precious metals even with a small amount of money. Would you like to know more about investing in silver? Then read our special on this subject:
Platinum
The precious metal platinum is used in catalysts for cars. Especially in diesel cars you see that a lot of platinum is needed. With the rise of electric driving, diesel cars are less popular. Cars that run on hydrogen, however, need platinum as well. An investment in platinum can therefore still be profitable. Do you want to know how investing in platinum works? Then read the article on this subject:
Palladium
Another precious metal that many people trade in is palladium. Palladium is also a good catalyst and the metal has many similarities with platinum. Unique is that palladium can absorb up to 900 times its volume of hydrogen. Palladium is used for watches and in dentistry. A well-timed investment in palladium can provide a good return.
What are the advantages of investing in precious metals?
Precious metals are chemically unique and scarce. Because they are easy to shape, gold and silver have been used as money for thousands of years. The prices are volatile, but in the long run they hold wealth well.
When you invest in precious metal, you have no counterparty risk. If you invest in a share or bond, there is always a risk that the counterparty will go bankrupt.
Another advantage of investing in precious metals is that it protects you against inflation. The price of gold often rises along with the general price level. Buying precious metals can also be attractive when the currency you use decreases in value.
Finally, gold is also a good, extra investment to diversify your investment portfolio. Gold does not correlate strongly with the prices of shares, bonds and real estate. When things go badly on the financial markets, you can achieve good results with gold.
What are the disadvantages of investing in precious metals?
Of course, there are also disadvantages to investing in precious metals. The biggest disadvantage is that precious metals themselves do not generate a cash flow. With shares or real estate you can build up a fixed income. Gold, on the other hand, only collects dust. You can buy shares in companies that are involved with precious metal, but when you do this you do not benefit from the advantages of buying precious metals.
Another disadvantage of investing in precious metals are the high transaction costs. When you buy physical gold or silver, you have to store and move these commodities. Also, you often have to take out insurance. Because of this, investing in precious metals can cost you money!
Also, investing in precious metals is a gamble. You buy precious metal in the expectation that an investor will pay more for it in a few years. When the opposite happens, there is no way to achieve a good result with an investment in precious metal.
How much should you invest in precious metals?
Of course, there is no one-sided answer to the question of how much you should invest in precious metals. Some investors do not see the point of investing in precious metals anyway. Other, more anxious investors, on the contrary, buy enormous amounts of gold and silver.
Well-known investors often hold five to ten percent of their assets in precious metals. Investor Kevin O’Leary invests 5% in gold. When the price goes up he sells some and when it goes down he buys some.
Coveted by scarcity
Precious metals are very scarce. Besides, many precious metals contain beneficial physical properties. This makes them suitable for various purposes and makes them even more attractive to investors.
Various precious metals are used as high-tech materials in medical and aviation technologies. But did you know that your cell phone, laptop and television often also contain one or more precious metals? In the future, the use of these will only increase, which could further increase the price of precious metals.
Coins or bars?
If you have decided to invest in precious metals, you can choose to invest in coins or ingots. Bars are more suitable when you want to invest a higher amount of money and when you have good storage options. If you want to invest a smaller amount of money in gold, coins can be more practical. The face value of a coin is much lower. In addition, the coins have a face value printed on them, so you can also pay with them.
In general, coins cost more money to produce. You can often sell coins for more money. In the end, it all comes down to your personal preference.
Pricing of precious metals
The value of precious metals is created by the interplay between supply and demand. Price drops can occur when new mines are discovered or when banks sell large quantities of a metal in one go. If demand increases, for example in times of crisis, the price of the precious metal will probably rise.
Precious metals are traded in dollars. This means that when you invest in precious metal in another currency, you may also be exposed to an exchange rate risk. When your currency decreases in value, you may lose money.
Precious metals often rise in value when the dollar falls in value. When the dollar strengthens, prices of precious metals often falls.
Silver or gold?
The prices of silver and good often move together in the same direction. It is wise to buy them in uncertain times. When it became known that the United Kingdom would leave the European Union, the prices of the precious metals gold and silver rose immediately. Also, during the corona crisis, you could see that precious metals strongly increased in price.
It is therefore wise to also look at the overall economic situation when you start investing in precious metals. Many precious metals are considered as a safe haven.
Nevertheless, the precious metal silver has more industrial applications. As a result, the demand for silver has become more dependent on economic prosperity.
The price of gold rose sharply during the corona crisis
Online trading or physical trading in precious metals?
Nowadays, it is possible to trade in the prices of precious metals online. When you trade precious metals online with a broker, you often do this to make money in the short term. With our overview of brokers you can open a demo account for free at a broker, so you can try trading in gold and silver. However, it is still possible to physically purchase precious metals such as gold and silver in the form of coins or bars.
Auteur
Over Alex Mostert
When I was 16, I secretly bought my first stock. Since that ‘proud moment’ I have been managing trading.info for over 10 years. It is my goal to educate people about financial freedom. After my studies business administration and psychology, I decided to put all my time in developing this website. Since I love to travel, I work from all over the world. Click here to read more about trading.info! Don’t hesitate to leave a comment under this article.
