A Beginner’s Guide to Precious Metals<\/p>\n\n\n\n
Gold and silver have been recognized as valuable metals and have been coveted for a long time. Even today, precious metals have their place in a savvy investor’s portfolio<\/a>. But which precious metal is best for investment purposes? And why are they so volatile?<\/p>\n\n\n\n There are many ways to buy into precious metals like gold, silver, and platinum, and a host of good reasons why you should give in to the treasure hunt. So if you’re just getting started out in precious metals, read on to learn more about how they work and how you can invest in them.<\/p>\n\n\n\n We’ll start with the grand-daddy of them all: gold. Gold is unique for its durability (it doesn’t rust or corrode), malleability, and its ability to conduct both heat and electricity. It has some industrial applications in dentistry and electronics, but we know it principally as a base for jewelry and as a form of currency<\/a>.<\/p>\n\n\n\n The value of gold is determined by the market 24 hours a day, seven days a week. Gold trades predominantly as a function of sentiment\u2014its price is less affected by the laws of supply and demand<\/a>. This is because the new mine supply is vastly outweighed by the sheer size of above-ground, hoarded gold. To put it simply, when hoarders feel like selling, the price drops. When they want to buy, a new supply is quickly absorbed and gold prices are driven higher<\/a>.<\/p>\n\n\n\n Several factors account for an increased desire to hoard the shiny yellow metal:<\/p>\n\n\n\n Unlike gold, the price of silver swings between its perceived role as a store of value and its role as an industrial metal. For this reason, price fluctuations in the silver market are more volatile than gold.3\ufeff 4\ufeff<\/p>\n\n\n\n So, while silver will trade roughly in line with gold as an item to be hoarded, the industrial supply\/demand equation for the metal exerts an equally strong influence on its price. That equation has always fluctuated with new innovations, including:<\/p>\n\n\n\n It’s unclear whether, or to what extent, these developments will affect overall non-investment demand for silver<\/a>. One fact remains: Silver’s price is affected by its applications and is not just used in fashion or as a store of value.5\ufeff<\/p>\n\n\n\n Like gold and silver, platinum is traded around the clock on global commodities markets. It often tends to fetch a higher price (per troy ounce) than gold during routine periods of market and political stability simply because it’s much rarer. Far less of the metal is actually pulled from the ground annually.<\/p>\n\n\n\n There are also other factors that determine platinum’s price:<\/p>\n\n\n\n Investors should consider that all of these factors serve to make platinum the most volatile of the precious metals<\/a>.<\/p>\n\n\n\n Lesser known than the above three metals is palladium, which has more industrial uses. Palladium is a shiny, silvery metal used in many types of manufacturing processes<\/a>, particularly for electronics and industrial products. It can also be used in dentistry, medicine, chemical applications, jewelry, and groundwater treatment. The majority of the world’s supply of this rare metal, which has the atomic number 46 on the periodic table of elements, comes from mines located in the United States, Russia, South Africa, and Canada. Jewelers first incorporated palladium into jewelry in 1939. When mixed with yellow gold<\/a>, the alloy forms a metal stronger than white gold. In 1967, the government of Tonga issued circulating palladium coins touting the coronation of King Taufa Ahau Tupou IV. This is the first recorded instance of palladium used in coinage.<\/p>\n\n\n\n Metalworkers can create thin sheets of palladium down to one-two hundred fifty thousandths of an inch. Pure palladium is malleable, but it becomes stronger and harder once someone works with the metal at room temperature. The sheets are then used in applications like solar energy<\/a> and fuel cells.<\/p>\n\n\n\n The largest industrial use for palladium is in catalytic converters because the metal serves as a great catalyst<\/a> that speeds up chemical reactions. This shiny metal is 12.6% harder than platinum, making the element also more durable than platinum.<\/p>\n\n\n\n Let’s take a look at the options available to those who want to invest in precious metals.<\/p>\n\n\n\n Exchange-traded funds exist for all three precious metals. ETFs are a convenient and liquid means of purchasing and selling gold, silver, or platinum. Investing in ETFs, though, doesn’t give you access to the physical commodity, so you don’t have a claim on the metal in the fund. You will not get the actual delivery of a gold bar or silver coin.<\/p>\n\n\n\n Shares of precious metals miners are leveraged to price movements in the precious metals. Unless you’re aware of how mining stocks are valued, it may be wiser to stick to funds with managers with solid performance records<\/a>. <\/p>\n\n\n\n The futures and options markets offer liquidity and leverage to investors who want to make big bets on metals. The greatest potential profits and losses can be had with derivative products. <\/p>\n\n\n\n Coins and bars are strictly for those who have a place to put them like a safety deposit box or safe. Certainly, for those who are expecting the worst, bullion is the only option, but for investors with a time horizon, bullion is illiquid and downright bothersome to hold.8\ufeff<\/p>\n\n\n\n Certificates offer investors all the benefits of physical gold ownership without the hassle of transportation and storage. That said, if you’re looking for insurance in a real disaster, certificates are just paper. Don’t expect anyone to take them in exchange for anything of value.<\/p>\n\n\n\nKey Takeaways<\/h3>\n\n\n\n
Gold<\/h2>\n\n\n\n
Silver<\/h2>\n\n\n\n
Platinum<\/h2>\n\n\n\n
Palladium<\/h2>\n\n\n\n
Filling Up Your Treasure Chest<\/h2>\n\n\n\n
Commodity Exchange Traded Funds (ETFs)<\/h3>\n\n\n\n
Common Stocks and Mutual Funds<\/h3>\n\n\n\n
Futures and Options<\/h3>\n\n\n\n
Bullion<\/h3>\n\n\n\n
Certificates<\/h3>\n\n\n\n
Are Precious Metals a Good Investment for You?<\/h2>\n\n\n\n