Investing in precious metals is one of the best ways to diversify your savings. 💰
Precious metals have been a part of humanity for centuries, and have been used for a whole range of items including currencies, jewellery and even dentistry. Since we’ve moved towards credit and paper currencies, most of us now keep our savings in bank accounts and the stock market. However, precious metals remain a key part of managing a balanced portfolio and keeping our wealth safe. In this article, we’ll be covering what precious metals exactly are, and how to get started with precious metal investing.
What are precious metals?
Precious metals are elements and metals that occur in the natural world and are usually rare and hard to find. These metals are used for industrial uses such as dentistry, electronics and construction, but also for jewellery (including that nice ring you have on 💍). They are also used as a safe haven investment that help reduce risk and get through periods of economic uncertainty.
The best known and most common precious metals are:
Yes, our favourite precious metal. Gold is one of the oldest precious metals on the planet and has been cherished and used since the Byzantine era. It was first used as a currency and ornament, and it’s now used in electronics and jewellery, as well as a safe haven for investments. It’s less volatile than other precious metals and has successfully maintained its value over the centuries.
Silver is another well known precious metal that is often paired with gold. It is a more useful metal and has more industrial uses, however, this does mean it is more volatile. That’s because if there is a dip in industrial production (which happens during recessions), then silver prices tend to take a hit. Having said that, silver is cheaper and therefore regularly used by day traders and beginner investors.
Platinum is a very rare precious metal that is usually used in ornaments and electronics. Because it is so rare, it can sometimes trade at even higher prices than gold, and therefore turn a profit. The main issue with platinum is that the precious metal price is closely tied with the auto industry. This means that during uncertain economic times when auto production dips, so does the value of platinum.
The benefits of investing in precious metals
Hedge against paper currencies
Paper currencies are the currencies we use every day such as the GBP pound and the USD dollar. These currencies are integral to our society and help us purchase our day to day items. However, paper currencies have a history of collapsing and not always being reliable, such as the Argentinian peso or the Turkish lira.
Precious metals cannot be destroyed in a fire, hacked or created out of thin air. This means we can rely on them still being valuable in a few decades and centuries. Over time, they have managed to maintain their purchasing power, which makes them an excellent hedge against market volatility and general instability.
As many of the gold experts we interviewed said, precious metals such as gold are an excellent safe haven during periods of economic and political stability. During a market downturn and recession, investors tend to invest in precious metals such as gold where their savings can still beat inflation while remaining safe.
If your precious metals are stored in a secure vault, no politician or banker can take them from you. As Alan Newman, editor of Crosscurrents says:
“Since gold is virtually indestructible, all that has ever been mined is still above ground and is never going to disappear. On the other hand, currencies, stocks and bonds can all suffer through bear markets or even collapse. We believe the current environment harbors an incredible amount of risk for all paper assets.”
Precious metals are a great way to diversify your portfolio in general. That’s because precious metals don’t work in tandem with the rest of the market. When there is a crash, gold tends to increase in value. This means your overall savings and investments don’t take such a hit and you won’t lose as much money.
Overall, a diversified portfolio will help you increase your returns. As hedge fund billionaire Ray Dalio says, a 5-10% allocation of gold is part of his portfolio strategy that is sustainable throughout all economic conditions.
How to get started
It’s important to note that precious metals should only take up a portion of your investments, rather than the entirety. If you’re looking to get started with investing, there are a few different ways you can buy precious metals:
- ETFs (exchange traded funds)
- Gold and silver mining stocks
- Physical bullion
There are different advantages and disadvantages to buying precious metals in different ways, and we’ve covered those before on the blog (see below). The main issue is that ETFs and mining stocks are simply numbers on a screen, and they aren’t much different than paper currencies. You can’t be sure you own those physical metals and that they will be returned to you during a crisis. This is different from bullion gold, silver and platinum, which you buy in its entirety and can hold and touch in your own hand.
This has happened before: for example, during the 2015 economic crisis in Greece, banks limited withdrawals to 60 euros per day. People had to wait in long lines in order to receive a very small amount of money, deepening the crisis and causing people to panic. Having bullion stored somewhere safely would help you in case this happened – even if it’s in a storage vault.
It’s also important to know how to store your bullion and make sure you don’t overpay in fees or charges. We’ve put together a few educational articles to help you get started on your gold purchasing journey. 👇
At Minted, we offer some of the lowest rates in the market, and we guarantee that you own what you buy: we only buy gold in bars of 10 grams, which means you can get your gold delivered and only pay the shipping fee. If you want to invest in gold in a safe and secure way, get started for free with Minted!