Precious Metals Investing: What to Know and What to Expect

For the past half-decade, most people have built a word association between “investing” and “pain.” The U.S. stock market has been northing short of unstable, employment levels have only slightly improved, and the housing market continues to be a source of major uncertainty and financial pain among those who decided to invest their money in property rather than in things like precious metals or rare coins. It is worth noting, though, that those who did choose to make investments in precious metals are among the most satisfied investors in today’s climate.

The reason for that satisfaction is simple: While the broader stock market has suffered from downturn after downturn, the market for precious metals has been soaring to new heights and setting entirely new records. Gold, in particular, has been a darling of the market for the past decade or so. It has been joined in recent years by the likes of platinum, palladium, and especially silver, making precious metals an even better investment strategy.

Before pursuing precious metals as a new option in a portfolio, though, consumers should understand that the market does fluctuate and that certain conditions at the Federal Reserve might impact the overall performance of gold, silver, platinum, and other precious metals. By understanding the future outlook of this investment, as well as the factors that determine its worth, a more sound strategy can be pursued at the very beginning.

Gold: The Biggest Success Story, But Not the Only One
Consumers have gone crazy for gold over the past ten years, driven largely by an economy that was always perceived to be on shaky ground even when it was outperforming analyst expectations. Additionally, the market has been driven in a significant way by political developments in the United States that have reinforced gold as one of the few things that won’t arbitrarily lose value based on political party dominance or economic bubble-bursts.

To that end, the price for gold has increased exponentially since 2003, driven by a combination of precious metal investing strategies, global economic uncertainty, and a complimentary surge in rare coin investing that has driven up demand for the precious metal in a wide variety of industries and applications. In 2013, though, things have been a bit shakier for gold as the economy begins to recover and the government’s future fiscal actions remain a bit unclear.

There was a surge in prices near the end of 2012 as the U.S. government looked poised to throw itself off its own, self-imposed “fiscal cliff.” Worries of higher unemployment, inflation, and virtually nonexistent interest rates sent investors scrambling for precious metals, and that was good for investment portfolios domestically. The fiscal cliff was avoided, however, and the Federal Reserve has since shown an interest in ending quantitative easing. Both conditions have caused gold to decline for the past several months.

Despite its recent declines in value, gold remains a solid investment choice for those who would rather not test their luck in equities. Perhaps as a testament to the newfound stability of the gold market, investors believe that it will retain much of its value even as interest in stocks begins to once again pick up in the face of greater economic stability worldwide.

Silver is the Real Star of the Show for 2013 Precious Metals Investing
While gold has been increasing in value exponentially for a decade or so, silver has been a bit more reluctant to increase in value until very recently. For much of its history as a traded commodity, silver was associated with relatively lackluster growth due to the inconsistency of supply, lackluster demand, and a “brand” that often took a backseat to gold. Those things are all beginning to turn around, though, as silver becomes one of the fastest-growing precious metal stocks in the United States.
Monex Live Silver Prices
In 2012, silver grew by an astonishing 23 percent. That places the growth in silver’s value ahead of both gold and platinum, which hardly ever happens in today’s modern precious metal market. The growth is due largely to the increasing use of silver in utilitarian environments, including in biomedical equipment and construction. It’s also being used increasingly in today’s smallest high-tech gadgets, and has even been employed by many medical facilities as a water purifier. Considering the majority of silver purchases have always been made for these utilitarian purchases, rather than for things like jewelry and other luxuries, that means silver is headed nowhere but up.

In 2013, the outlook for silver remains strong despite the potential for economic stabilization and more aggressive policies at the Federal Reserve. That’s because demand for silver in a wide variety of industries is expected to keep increasing in a big way around the world, offsetting any declines that might be otherwise attributed to the economy and domestic political developments.

Platinum Represents a Better Bet During Times of Economic Stability
Compared to gold and silver, platinum is actually quite rare. Indeed, the mines that produce our entire supply of platinum lie almost entirely in just two countries: Russia and South Africa. The two countries produce plenty of platinum to cope with demand, of course, but they need to produce far less to satisfy today’s industrial companies and consumers than do the mines that produce gold and silver.

The relative rarity of platinum as a metal, as well as its far less frequent use in industrial applications, means that its price remains relatively steady during good and bad economic times. While gold has set new records for its price during the most recent economic downturn, and silver grew by as much as 23 percent during last year, platinum managed only to post gains of about 16 percent worldwide in 2012.

While 16 percent might sound either really good or really bad, depending on the nature of the investment, it’s worth noting that platinum posts this kind of gain on a routine basis. Its relative stability and predictability makes it an absolutely excellent choice for consumers who don’t want to hedge their bets in a major way, exposing their portfolio to potential big losses in the future. It’s a great supplement when buying gold and silver, too, as it can help a portfolio retain at least some of its value if either of those metals is pushed downward by political or economic forces. Of course, platinum is also highly in demand for high-end jewelry purchases, and that only helps its overall stability and increase in value over time.

The Key to Success: Diversify, Diversify, Diversify
Precious metals might be a bit more unconventional in terms of investing, but they’re still an investment that is expected to build a larger net worth for those who take the plunge. Like any investment, including equities and stocks, it’s a good idea to make sure that any precious metals portfolio contains a large number of different mechanisms that can help propel it toward growth and insulate it from fluctuations in prices or other factors.

Though precious metals investing is somewhat different, it can still be done as part of an exchange traded fund (ETC), mutual fund, futures or options, and even in old-fashioned bullion bars. Committing to at least two of these different strategies can help to create a diverse portfolio, with many metals and mechanisms, which can be designed to grow even in hard times.

Remember, too, that it matters which company handles the investments themselves. Precious metal companies are not created equally, especially in an era when many investments are pursued via the Internet from websites that might be hardly known and all too persuasive. While industry sources like Monex benefit from a sterling reputation in the industry and a wealth of experience that is an asset to investors, many other companies simply cannot claim the same type of experience and success.

Pay Careful Attention and Remember to Ask Plenty of Questions
The best way to pursue an investment in precious metals is simply to be prudent when seeking a company that can help start a new investment strategy. As with stocks, bonds, and other tools based in more traditional equities, consumers need to ask key questions. Understanding how money will be invested in each metal, and what the composition of the portfolio will look like after it has been assembled, will reveal whether or not the company is a sure bet or a risky manager that might compound losses and charge excessive fees.

By asking the right questions, comparing investment companies’ products, and understanding the unique way that each metal derives its value over time, consumers can ensure that they get the fairest deal possible with leaving behind traditional stock market investments and pursuing a strategy that embraces the exponential rise of gold, the double-digit gains of silver, and the relative stability of even rarer metals like platinum. This careful approach to investing gives consumers their best shot at sustained and continued growth in a variety of climates, which is especially important during a time when the U.S. government and Federal Reserve look poised to pursue more aggressive growth and economic development strategies.


Precious Metals Investing: What to Know and What to Expect
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