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Why And How To Invest In Precious Metals?

Jan. 12, 2020 4:53 PM ET
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For both the beginner and the experienced investor, precious metals provide an excellent way to diversify your investment portfolio. Currently, the ability to invest in precious metals is not limited to gold and silver. The presence on the market of platinum and palladium, combining the properties of precious and industrial metals, according to Rare Metal Blog, makes it possible to immediately invest in a “basket” of precious metals and optimize the risks of price fluctuations.

The question arises, what are the ways to invest in precious metals and what is this process. Investment precious metals - gold, silver, platinum, high-grade palladium, sold in the form of ingots with a purity of at least 995 samples and coins with a precious metal content of at least 900 samples.

Reasons to invest in precious metals

Investing in precious metals is, first of all, a reliable way to protect capital from inflation and currency fluctuations. In times of crisis, investors take profits and pour them into more reliable tools. These include precious metals that can not only save capital but in some cases bring extra profits.

Precious metals have high liquidity and are traded on the world market, which is why they are easily bought and sold in any country. As the 2008 crisis showed, real estate can also be regarded as a protective asset, but liquidity leaves much to be desired and the transaction time spent is much higher.

Investments in precious metals make it possible to balance the investment portfolio and ensure minimum profitability, both during the subsidence of the financial system of an individual country and during global crises. No wonder every millionaire in the investment portfolio has about 15% of the funds invested in precious metals.

Precious metals and Fiat currencies

Most national currencies are fiat (from lat. Fiat - decree, indication), i.e. secured and guaranteed by the power and authority of the state. Such money does not have independent value or it is very small and incommensurable with the declared face value. The government obliges to use the national currency (in the form of coins, non-cash money, banknotes, electronic money) as a legal means of payment in the country.

Fiat money is sensitive to the effects of internal and external macroeconomic factors, and may also lose its value as a result of the implementation of state policy and even individual political decisions. So, when the country's financial system sags, the government, having a monopoly on the production of money supply, can launch a printing press with the aim of injecting into the financial system or paying debts, after which the money loses its purchasing power.

The amount of electronic or paper money is unlimited, it can be infinite. The volume of precious metals on our planet is limited by world reserves, and their increase in circulation is limited to their mining.

Forms of investment in precious metals

Investing in precious metals is carried out in various ways: the purchase of investment coins, the purchase of ingots, the opening of depersonalized metal accounts. In addition, there are other ways to invest in precious metals, but this is a topic for another discussion.

Bullions Precious metal bullions are standard and measured. Measured bullions can be from 1 gram to 1 kilogram. Standard bullion weighs more than a kilogram.

When a precious metal bar is purchased, a quality certificate issued by the manufacturer is issued to the customer. The certificate indicates the metal sample, the mass of the ingot and the number. In other cases, operations with physical metal bullion are subject to value-added tax. You can also take them with you, and with modern security solutions to storing your metals at home.


Precious coins are divided into two groups: investment - coins with a simplified design, made in regular or improved quality and collection (commemorative) coins with high artistic design and high quality. Commemorative coins are primarily valuable to collectors-numismatists, due to the limited circulation of the issue. The price of such a coin depends on its numismatic value and can grow much faster than the price of the metal from which it is made.

Investment coins are issued in mass editions, the quality of minting is lower, and simple external design (without a mirror surface). The bottom line is that the market value of the investment coin is as close as possible to the value of the precious metal with the minimum cost of minting.

Precious metal account

The most profitable option is to open a precious metal bank account in one of the four precious metals. An investor, when opening an account, buys metal at the current exchange rate of the bank, and when closing compulsory medical insurance, he sells the bank at the prevailing price on the closing day.

In addition, the depositor can open an urgent mandatory medical insurance, which implies the calculation of interest on the balance. Depending on the bank and the storage period of precious metals on the account, the fee is from 1% to 5% per annum and can be charged either in grams of precious metal.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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