Precious metals are metallic chemicals that are naturally occurring. They are rare metals that have high economic value. This is because of their rarity, store value, industrial uses as well as their role in history. For this reason, they have over time been valued by people.
Investors, as well as traders, typically buy precious metals through several methods. These include bullions, bars, coins, derivatives markets like futures and options, stocks as well as exchange-traded funds (ETFs).
There are several precious metals but the most popular are gold, silver, platinum and palladium. Of these, gold, as well as silver, are regarded as coinage metals. This is because they are popularly used for making coins.
They also have important uses in jewelry making, art, dentistry and medicine. Other available precious metals but not so popular are rhodium, ruthenium, osmium and iridium. Asides from their practical uses, the demand for these metals is driven by their store of value and role in investments.
Historically, precious metals especially gold and silver were used in minting currencies. Therefore they have always played a huge role in the world economy. Nowadays, they are still relevant in the global economy but their role has shifted from minting to owning them as assets.
Owning them helps investors to have a diversity of portfolios asides from other financial securities and instruments. They also act as protection against an unstable financial market. In fact, the major influencing factors for their demand are concerns over inflation, financial instability and the risk of war.
Investing in Precious Metals
Since gold and silver are the two most popular precious metals, most investors like to deal more with these two metals. These two have been prized for several generations and have remained relevant and valuable all through history. This has made them great investment vehicles for those who want growth and long-term stability.
As an investor, you have a variety of ways to add precious metals to your portfolio. You can either purchase it physically or as a traded fund or commodity. Although precious metals have a large degree of security, certain risks may still occur.
Prices may fall during times where the economy is strong. This is because investors may be forced to liquidate their assets to fund other bills and cover some margin calls. Also, the physical asset may prove difficult to sell when there is heightened volatility.
There is also a risk of theft when not adequately stored. You can see this guide on investing in precious metals for more details.
Having established this, the next question you may like to ask is which precious metal should you invest in? Should you go for gold, silver, or for both? This is solely dependent on you and what your plans are.
However, below are the pros and cons of investing in the two metals. You can use this as a guide to know which of the two is best to invest in.
Advantages of Investing in Gold
1. Better Value
When compared to silver, gold has a much higher value. It is also known to have maintained its value even over centuries. Yes, the price may drop occasionally but all in all, it is a commodity that increases value over time.
It is highly resistant to corrosion and its prominent color and other characteristics make it attractive and durable. Furthermore, it is less volatile when compared to silver. Gold deposits are also rarer than silver so it helps to grow its value due to increased demand.
2. Ease of Storage
Gold is more value-dense than silver. For instance, it will require up to around 70 ounces of silver to buy one ounce of gold. What this means is that one would require 70 times more space to store silver than you need for gold. Therefore, you can easily store gold.
3. High Liquidity
Although both precious metals are quite liquid, gold is much easier to sell. It is a safer form of investment and it is of higher value, therefore, people are more inclined to buy. On the other hand, people may not be willing to buy silver at certain periods.
This is because its value rises and falls rapidly and therefore may be difficult to sell at a good price.
You will find more information about investing in it here https://www.proshareng.com/news/COMMODITIES/7-Important-Facts-and-Benefits-of-Gold-Investment/47029.
Gold may take a long time before it grows in value. You may have to wait several years before you can make a decent profit if you decide to sell. Therefore it is good for the long term and for those whose focus is on retirement.
Additionally, because it is soft and malleable, it can get easily damaged so you need to protect it. A small dent or scratch can result in a loss of value.
Advantages of Investing In Silver
1. It is Less Expensive
For people who do not have enough to buy gold but would like to invest in precious metals, silver provides an option. It is way cheaper than gold and you do not need to pay huge costs to buy or begin trading in it.
2. Quick Returns
Because the price of silver changes rapidly, it is possible to make some quick gains within a short time. All you need to do is proper research, speculate and watch out for when it is best to buy or sell.
Silver is less liquid than gold so it is harder to find people who are willing to buy it. There are people available to buy silver but the problem is the amount they are willing to pay. At the end of the day, you will have to do a lot of shopping around before you find a reasonable buyer.
This precious metal is also very volatile and the price can change before you know it. This makes it laborious to follow especially for people planning for the long term. Having seen the pros and cons of gold vs silver, you can decide on which of the metals is best for you.
Silver and gold are two of the most popular precious metals available. Both are quite unique in their own way but they are also good investment options. Whichever one you choose out of the two will depend on your risk averseness and unique personality.