Gold is one of those things that everyone knows at least a little something about. It’s a precious metal. It’s a naturally occurring mineral. In the past, it was the currency of choice for the world economy. It’s still traded on exchanges across the globe to this day as an asset. And above all else, it is valuable.
But when it comes to investing in gold and other precious metals, many people might feel a bit lost. What’s the real value of these metals today? Why should you consider adding them to your investment portfolio? How do you go about doing that, and from a larger perspective, what is the actual process at play behind the scenes?
In an era of increasing economic volatility, many ordinary investors are now considering adding gold to their portfolios as a hedge against inflation and market downturns. But when contrasted with trading stocks and bonds, the average person’s knowledge of the gold markets can be a little lacking. It’s nobody’s fault; gold trading just isn’t as well-covered by the media as other types of trading. But still, that remains the unfortunate reality.
With that thought in mind, I had an idea that an easy-to-digest, practical guide to investing in gold and other precious metals with accompanying commentary from an experienced source might be just what some people need to gain the knowledge they desire and the confidence they need to take the plunge and make an investment. Luckily, that’s just what I’ve put together, and the experienced source providing commentary is none other than Alexander Spellane, the founder and CEO of Fisher Capital Group, an investment firm that Forbes has ranked among “America’s Fastest Growing Precious Metals Companies.”
Understanding Precious Metals
To start with, it’s essential to understand what precious metals are. Gold, silver, platinum, and palladium are the most common types of precious metals that investors consider. Each metal has its unique characteristics and market dynamics, which can influence its value. For example, gold is malleable and still generally viewed as a viable alternative to fiat currencies, while silver is a crucial component used in a host of modern-day industrial processes, particularly in the manufacturing of green tech. These and many other factors help determine their value.
Reasons to Invest in Precious Metals
Precious metals, particularly gold, have been historically viewed as a safe place to invest money during periods of high inflation and economic uncertainty. Alexander Spellane notes, “When inflation rises, the value of paper currency can diminish, but gold often retains its purchasing power. In fact, throughout history, gold has proven time and again to be a reliable store of value, often appreciating when the economy tumbles. Unlike currencies that can be printed at will, gold is a finite resource, and its intrinsic value tends to hold steady no matter what’s happening in society.”
That means that adding precious metals to your investment portfolio can help mitigate risk. This is partly because they often behave differently on the markets than stocks and bonds, and serve as an effective buffer against volatility on the other securities exchanges. “A well-balanced portfolio can help ensure steady performance, regardless of economic conditions,” advises Spellane. “And in my opinion, it’s difficult to have a well-balanced portfolio without some holdings in gold or other precious metals.”
How to Invest in Precious Metals
First, it’s always possible to invest in stocks of companies that mine precious metals. These stocks can offer a significant upside in terms of returns, but they also carry additional risks associated with operating in the mining industry. If you do consider going down this route, it’s not quite as simple a prospect as you might think—there are factors like mine shaft collapses, company bankruptcies, and geopolitical instability to consider.
Another possibility is to purchase exchange-traded funds (ETFs) or mutual funds focused on precious metals. These funds invest in physical metals or mining companies and offer liquidity available to the general population that are similar to stocks. This option comes with management fees (usually less than 2%).
It’s important to note that neither one of these options are guaranteed to perform the same as physical gold and in actuality have not always done so in the past.
The best and most straightforward way to invest is to buy physical gold or silver. This can be done by purchasing coins, bars, or bullion. When purchasing physical metals, it’s crucial to consider storage and extra insurance costs.
The Buying Process
If you decide to invest in physical precious metals, the process generally involves selecting a reputable dealer, determining the type and quantity of metal you wish to purchase, and finalizing the transaction. Alexander Spellane emphasizes the importance of researching dealers and understanding market prices. “Transparency and reputation are key. Always ask for documentation and ensure you’re getting a fair price based on current market rates. That is my number one piece of advice for any novice or would-be investor in physical precious metals.”
Purchasing an interest in precious metals through ETFs or mutual funds is done through a brokerage account in much the same way ordinary stocks or bonds are bought. Once your account is set up, you can have your broker seek out funds that focus on precious metals (or do it yourself, if that’s more your speed). Look for ETFs that hold physical gold or silver bullion, or mutual funds that invest in a diversified portfolio of mining companies. Spellane notes, “Investing in ETFs can simplify your experience and give you exposure to precious metals without the hassles of physical ownership. Just make sure to choose funds with solid management and low fees.”
Investing in mining companies involves buying stocks of firms that explore, extract, and produce precious metals. To get started, research reputable mining companies and analyze their financial health, operational efficiencies, and market position. You can find mining stocks through your brokerage account just like any other publicly traded company. It’s always wise to consider the company’s geographical location and the regulatory environment, as these factors can sometimes have a real impact on its performance. Spellane advises, “Before investing in mining stocks, familiarize yourself with the industry landscape and the specific challenges each company faces–you can never do too little research when it comes to mining companies or even a specific mining site. The best choice is a well-informed choice.”
Conclusion
So, there you have it; without getting too much further into the weeds on the technical and logistical aspects involved, those are the ABCs and 123s of trading gold and other precious metals. If you’re still feeling a bit uncertain about the idea, try keeping this thought in mind: Investing in precious metals can feel like a plunge into the unknown, but with the right guidance and information, it can be a rewarding journey. Don’t let uncertainty hold you back from exploring the potential of gold and silver.
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