Throughout history, we have been fascinated by and in love with gold and silver. Many societies have seen them as the ultimate symbols of wealth, luxury and success. However, investors are fast realizing that these metals aren’t just symbols of idealized wealth but can help produce real wealth by acting as alternative investment vehicles. What is more, gold and silver are far from the only precious metals worth investing in. Platinum and palladium can both also help add to your wealth and protect it.
1. Intrinsic Value
Unlike many other asset classes during the current economic uncertainty, precious metals are still valuable. This is partly because such metals will always have an intrinsic value, no matter what the economic conditions are. As the saying goes, gold has never been valued at zero. Although the way in which the prices of gold and other metals fluctuate daily can seem alarming at first sight, remember that all assets fluctuate in this way. The realities of inflation and deflation show us how drastically cash, perhaps the most common asset of all, can fluctuate in value. Indeed, at points in time when it’s feared that inflation will occur in the near future, the price of alternative commodities like precious metals goes up, as such assets become more desirable. With each global financial crisis that comes along, more people are converted to the idea of paper money being potentially worthless in the future, including many experts in investment circles. All investment is a gamble but in even the most extreme financial crises, precious metals are actually the safest bet for protecting your wealth.
2. High Demand
Demand for precious metals will always be high because of their various uses. After all, people will always need to mint coins and will always want to make jewelry. These are not the only things metals are used for, however. Various industrial sectors also have their uses for these materials. The emergence of the BRIC (Brazil, Russia, India and China) economies on the global industrial and economic stages guarantees that precious metals will continue to be used for these industrial purposes, indeed increasingly so. For example, as gold is a vital ingredient in many a high technology component, it’s much sought after by the electronics industry. It also makes for a great electrical conductor and a very effective heat shield. Qualities such as stability and corrosion-resistance make it all the more desirable in an industrial context.
Meanwhile, platinum is used in the manufacturing of medical and automotive equipment and computer parts. Palladium, being softer than platinum, has its own specific uses. These include raw material and photo processing, fuel cells and the purification of water, oil and natural gas. Silver is used in batteries, bearings and moving parts, mirrors and coatings, medical equipment, surgical tools and electronics. It is also used for brazing and soldering and is increasingly becoming an important part of the solar energy movement, thanks to the use of silver paste in the majority of crystalline silicon photovoltaic cells. With metals having so many purposes, there will always be a lot of people who want to buy, so it’s worth keeping metal in your portfolio at all times.
It’s important to diversify your portfolio in order to give yourself both security and flexibility. By spicing your portfolio up by adding precious metals into the mix, you’re reducing risk and limiting volatility. Not all asset types will move up or down in price at the same time or to the same degree. If you have an equally-weighted portfolio, the damage done to you when one of your investment vehicles crashes in price will not be as severe as it would be if your portfolio was dominated by that one asset class. Indeed it pays to even diversify the precious metals of your portfolio—be sure to keep more than one type of metal as part of your portfolio at all times. Just as gold can perform better or worse than real estate or art on any given day, it can also perform differently to silver and all the other precious metals.
Precious metals aren’t just there to look pretty but can add real value, flexibility, security and diversification to your portfolio. As long as the consumption of precious metals exceeds production and as long as other asset classes also have an element to risk to them, investing in precious metals is the smart thing to do.
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