Many investors understand that owning precious metals is not as glamorous as owning shares of Apple or Tesla. Yet, precious metals hold an important position in the portfolio of any investor that wants to hedge against economic uncertainty and volatility.
We are currently living in highly uncertain and volatile times as a new wave of populism and military adventurism sweeps over the geopolitical landscape. 31The article provides a no-frills straightforward guide on investing in precious metals.
The article provides a no-frills straightforward guide on investing in precious metals.
Go the traditional route with physical coins and bars
The traditional way to invest or trade precious metals is to buy physical coins and bars made out of precious metals of your choice. You could buy bars and coins made from pure gold, silver, palladium, platinum, and other precious metals.
The idea is to buy precious metals when they are undervalued or when their price is low. Ideally, you’ll sell them when the price appreciates and you can book price gains.
Some folks also argue that buying jewelry made from precious metals is a great way to have physical investments in precious metals.
However, I beg to differ because jewelry has sentimental value and you might not find someone that appreciates the jewelry as much as you do when you want to sell. There’s also the risk of taking an ego-trip to wear the jewelry and unwittingly attract undue attention that might lead to the theft of such investments.
There’s also the risk of taking an ego-trip to wear the jewelry and unwittingly attract undue attention that might lead to the theft of such investments.
If you want to protect yourself against economic uncertainty by owning precious metals, keep it simple and buy bars and coins. You can choose the self-storage method in which you keep the precious metals in a
You can choose the self-storage method in which you keep the precious metals in a safety deposit box or in a safe in a secure location. You can also choose to store your precious metal with brokers – for a fee paid monthly or annually.
It would also be in your best interest to ensure the precious metals against theft or other unforeseen circumstances that might take them out of your possession.
However, the cost of safekeeping in safety deposit boxes or the insurances premiums you pay might eat into your profit margin when you choose to sell and convert the precious metals into cash.
Go the modern route with paper securities
As seen above, investing in the physical form of precious metals raises liquidity challenges because you might find it difficult to buy and sell precious metals in order to profit from short-term price movements.
Physical forms of precious metals also have security and cost of investment challenges. However, investing the paper forms of precious metals could give you exposure to the stability that precious metals hold in uncertain economic times without the attendant risks.
You can invest in paper forms of precious metals by using derivatives such as options, futures, CFDs, binary options, ETFs, and ETNs among others.
Lucas Harris, an analyst, defines derivates as “a trading/investment contracts whose value is derived from an underlying asset to provide the holders with exposure to the investment without actually owning the asset.”
In essence, precious metals derivatives allow you to profit from price actions in the precious metals market without physically owning the precious metal.
One key advantage of trading precious metals with derivatives is that you are not limited to making a profit when the underlying precious metal books price gains alone.
You can book profits when precious metals are trading up, down, or sideways. In addition, derivatives allow you to trade precious metals as the fraction of the cost you’ll need to buy the physical amount of such assets.