Gold and silver along with other precious metals provide a fantastic long-term investment for those wanting to prepare for a future with economic uncertainty. Both gold and silver can keep their prices fairly even during times of economic depression or when inflation occurs. Having a better grasp of how gold and silver perform in today’s market as well as how the economy impacts their prices will allow you to consider whether expanding your portfolio with precious metals is the right next step for you.
The Global Economy Directly Impacts Silver Prices
Silver is most commonly used in industrial production and technology such as tablets, smartphones, vehicles, and photovoltaic cells along with other commonly used products. As gold is usually only employed in jewelry manufacture, silver as such is more prone to market volatility. As the economy springs back into shape, the price of silver tends to rise.
Silver Offers Better Hedge Against Inflation
During times of inflation in the United States, gold and silver both seem to perform fairly well. Partially because the dollar becomes weaker as the cost of goods rises. This means that purchasing gold and silver using other currencies makes them more affordable for many. Given the industrial applications in which silver is commonly employed, it often does better in a market where inflation is skyrocketing and the value of the dollar is falling.
Silver Has A Higher Market Volatility
The downside of investing in silver is that its market volatility is two or three times that of gold. Traders can often benefit in these instances, but for those investors managing or expanding their portfolio, it becomes risky. Though short-term gains are greater with silver, it often also carries a much larger downside than gold.
Gold Makes It Easy to Diversify a Portfolio
Gold is considered the most powerful investment to diversify a growing portfolio. Though silver still does fairly well, it has a weak correlation when connected to bonds, stocks, and commodities. Gold’s value is not correlated to nor determined by stocks or other common investments. This is simply not the case with silver or other industrial metals as it is widely used in the production of many products, whereas gold has very few applications.
Because investors are rushing to protect their retirement portfolios with gold, many are wondering, “How can I transfer my 401k to gold without penalty?“. Once you learn how to do this you can save yourself a huge chunk of money by avoiding IRS penalties.
It Is More Affordable to Invest in Silver?
First-time or small-time investors will find that silver is much more affordable an investment than gold. As silver is fairly low priced, it is a good option for those looking to learn the ropes of precious metal investing.
How Do You Invest in Gold or Silver?
The reason gold and silver both remain popular investments is that they’re available in different forms.
Physical Form: Unlike other investments such as stocks or bonds, silver and gold are both available in physical form. This makes it easy to purchase bars or coins to hold in a brokerage account. Investors also have the option of storing the precious metals at home or through a third-party depository.
Many investors find the physicality of gold and silver a plus side as it allows them to hold tangible evidence of their investment.
Of course, there’s also a downside to choosing to invest in coins or bars. For example, investors often have to pay tacked-on premium prices due to markups and distribution costs. Additionally, the price of storage and insurance can also skyrocket the initial investment costs.
ETFs Or Exchange-Traded Funds: This option eliminates the full responsibility of investors of having to safely keep and store their physical assets. It is possible to purchase shares and store them in a brokerage account. An operator is the one that holds the physical gold or silver and charges an expense ratio for their services. ETFs unfortunately deny investors access to underlying precious metals, and what’s more, they are often taxed in the category of collectibles, making them fairly low on capital gains.
Mining Funds or Stocks: There is also the possibility of investing in companies that mine gold and silver.
Gold Futures: Gold futures are a contract that outlines an agreement that highlights a certain date when precious metals are bought or sold. Investors will trade the contract directly on an exchange. Unlike physical gold investments, gold futures have no liquidity or management fees, although trade fees are sometimes charged by brokerage firms. Beginner investors should steer clear of this option as it carries a great deal of risk. It is possible for your losses to greatly exceed your initial startup investment.
5 Tips for Purchasing Physical Gold
Investing in physical gold is a rewarding experience, but here are some things you should keep in mind:
1. Choose A Reputable Dealer
There are a lot of scam artists and unscrupulous sellers out there when it comes to gold. Most commonly employed are pressure tactics that force a sense of urgency to purchase, or sellers will often significantly inflate the price of their gold beyond its value. Do your research and determine if a seller is indeed trustworthy.
**The Background Affiliation Status Information Center offered by the National Futures Association can help you check out any firm’s or individual’s background.
2. Spot Those Fees
Dealers will often charge significantly more than the actual value of the gold. Usually, these tacked-on charges are explained away as a dealer’s fee and distribution costs.
3. Secure Storage Is a Must
Physical gold requires careful storage as many will possibly attempt to steal it or scam you out of your investment. It is recommended that you store your physical asset somewhere safe such as a safety deposit box or a literal safe. Of course, the safe storage of gold can add up in costs as a safety deposit box will start at $30 and run you several hundred dollars for a larger size.
4. Insure Your Gold
As your gold is now a physical asset, consider getting comprehensive insurance coverage to protect your investment. This is an additional cost, but well worth it as long as you read the fine print in the policy.
5. Gold Is Hard to Resell
Reselling physical gold is much harder than selling stocks or funds. In all instances where you find someone to sell your gold, you won’t get a fair price. Pawn shops, for example, will give you a small percentage of what your gold is worth. Likewise, an actual gold dealer will also give you a much lower price than what you initially invested.