The Advantages of Investing in Precious Metals

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Investment management is a large and lucrative industry in the United States and around the world. Many individuals are not comfortable evaluating and making decisions regarding their own portfolios, especially when it comes to less publicized or more unknown asset classes, like natural resources. Any financial planner will tell you that allocating a portion of the equity side of a portfolio to lesser-known classes can be a worthwhile financial decision. Financial planners and analysts understand that natural resources investments, like securities and funds, can be an essential part of a portfolio. While common investment are often in oil and other energy sources, precious metals are also a popular and often stable form of investment.

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Most Americans know that metals like gold and silver can be good investments but many do not understand the details. With the social stereotype of precious metals being the investment favorite for paranoid theorists who believe the economy will one day crash and gold will be the only form of wealth left, many people might feel like this is an uncertain area in which to start investing. While some individuals do purchase and keep bars of gold, this is not the only way to invest. A lot of the precious metals options for normal investors do not exist in a tangible form. A more popular option for natural resources investing is funds, like ETFs, or exchange traded funds.

For those who understand the difference between various asset classes and how to choose investments that will yield long-lasting results, precious metals are compelling for several reasons. As many people know, precious metals like gold have never and will never be valued at zero. While their worth might fluctuate like other forms of investments, precious metals hold a more intrinsic value than paper money, stocks or bonds. Although less common and less publicized, silver, platinum and palladium are also popular metals to invest in. All four can boast steadily rising prices since the economy crashed in 2008 and while there have been some dips in value, they have been short and temporary.

Although many people understand that precious metals are valuable, they do not necessarily know why. Besides having worth as metal used in jewelry and currency, gold, silver, platinum and palladium all have many other uses. Gold is used in electronic equipment and wiring, making it incredibly valuable in the current electronics-driven American lifestyle. Platinum has uses in medical equipment and palladium is used for wiring and things like processing photos and purifying water. These sorts of practical functions ensure they will continue to hold their value, even if something devastating does happen to the economy once again. While the current values will not necessarily hold or increase, their economic worth will never drop below zero.

Gold
Gold is the most common and, by many standards, valuable of the precious metals. Gold is used commonly in jewelry, primarily due to its malleable nature, its pleasing color, and its long tradition of association with royalty and wealth. Pure gold isn’t used as regularly as gold alloy, often mixed with mercury or platinum. Gold is measured by karats which helps denote the value of an individual piece. Pure gold is also known as 24 karat gold. Gold alloy that is fifty percent gold and fifty percent another substance is known as 12-karat gold. Gold has a long history in currency and jewelry and was favored by early kings, pharaohs and other royalty for its rarity and beauty. In more common times, gold has many other uses. Gold is primarily used in wiring for conduction purposes, in computer and cell phones for its use in data transmittal, in dentistry for false teeth, as a glass pigment, and in circuits and in gold-coated polyester film in space shuttles. In 2011, the United States produced 237 metric tons of gold.

Gold has hundreds of uses, which is part of the reason it still maintains a high value in the modern world. A combination of its historical uses and its present uses makes gold a very valuable commodity for investment purposes. As a natural resource, there are many ways one can invest in gold. A Good Delivery bar, the stereotypical bar of gold depicted in movies and the media, is the international standard in gold trading. Exchange traded products are also a common form of investment, which include exchange-traded funds, exchange-traded notes, and closed-end funds. These sorts of funds are traded on local and international markets much like securities. Gold accounts are also an option, as well as gold-backed derivatives. A unique market quality that makes gold an exceptional commodity is its frequently changing supply and demand. This causes market and cost variations unlike virtually any other natural resource and, despite occasional drop offs, drives the price up and up.

Silver
Silver is another very common commodity that holds great value in modern culture. Silver, like gold, is used in jewelry like earrings, necklaces, and watches. Silver is also used in electronics, heating and cooling implementations, chemical production, and in producing energy-providers like solar panels. Although silver is generally not valued as highly as gold, it also has a long history in being used for eating utensils, dinnerware, decoration and vessels by royalty and the wealthy. Silver nitrate, a form of silver caused by nitric acid dissolution, also has many uses in science and engineering. In 2011, the United States produced 1,160 metric tons of silver.

Investment opportunities in silver are very similar to opportunities in gold and are similarly seen as a safe haven from economic downfall. In the last few months, however, silver has slid more than 9% since the start of 2013. However, this does not mean that this is a poor time to buy. Due to this presumably temporary position, silver prices will be on the upswing again soon. Buying when prices are low can ensure a higher payout when prices spike once more. Like with gold, physical silver, ETFs, and silver-backed derivatives are all worthwhile investments.

Platinum
Platinum is another precious metal of considerable worth that is becoming increasingly popular with investors. Although platinum does not have the extensive history of use that gold and silver boast, it is one of the rarest elements in the earth’s crust. Platinum is used in chemical production, cancer treatments, medical implements, jewelry, and computer equipment. More and more uses for this relatively new metal are being discovered all the time, driving its value consistently upwards. This developing usage has a large impact on the availability of platinum and thus its worth, making this metal a unique investment opportunity.

Many of the same investment opportunities exist for platinum as for gold and silver, although due to its rapidly developing uses, now is a crucial time to buy. Investors who buy in now could find themselves very wealthy as the limited supply coupled with rising values make purchasing platinum very expensive in the near future. Although uncommon, investors do have the opportunity to purchase platinum bullion, although ETFs and derivatives are more logical investment choices.

Palladium
Palladium is the rarest metal commonly used for investing and is also the least common in modern society. It was discovered in the early 1800s and its uses are far less known to the average American than platinum, gold or silver. Although it is also used in jewelry, it is more commonly used in electronics, medical equipment, water treatment and fuel cells. The most popular use of palladium is in catalytic converters. Palladium has the unique quality of being lethal in high doses, making it an unusual investment opportunity.

Palladium sells at a higher cost per troy ounce than many other precious metals investments. Physical possession of palladium as an investment is possible, but not popular. As with gold, silver and platinum, more conventional investment approaches are more common.

According to experts, there is no better time than the present to start investing in precious metals. Prices have been steadily on the rise, especially with recent technological developments requiring the uses of these unique and useful natural resources. As any financial planner will tell you, natural resources investments, including precious metals, can be a crucial part of a portfolio, especially in times of economic volatility. For those who have never considered investing in gold, silver, platinum and palladium, now could be the chance. To break into natural resources investing in a way that is appropriate to personal risk tolerance and financial position, now is the time to talk to an investment advisor or doing some independent research. Prices are continuing to rise and with so many uses, the demand for these metals will only continue to grow, making precious metals a worthwhile long term addition to your portfolio.

Referenced Sources:
http://geology.com/minerals/gold/uses-of-gold.shtml
http://geology.com/articles/uses-of-silver/
http://moneymorning.com/2013/02/26/investing-in-silver-price-dip-is-a-good-time-to-buy/
bullion.nwtmint.com/platinum_uses.php

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