Investing In Precious Metals Can Be a Hedge Against Inflation

investingPrecious metals like gold, silver, and platinum are the three most traded metals that can help out an investor to protect wealth while also help to increase it. The prices for precious materials do fluctuate, but they have stability and assurance in the commodity market that other scripts may not have.


Prices of precious metals have been steadily increasing, even though there is a feeling that new discoveries in mining can affect prices. The appeal for investing in precious metals is constant, notwithstanding continually fluctuating prices. When you invest in precious metals, you create a hedge against inflation and any downturns in the economic scenario. Precious metals retain their value even when there is economic distress, and have proved their value, time and again, even in the worst uncertain economic scenarios.


Investing in precious metals can be done in several ways. You can physically buy the metal in the form of bullion that most countries create from some of their stock of these metals. So you will find gold bullion and silver bullion largely available, which you can hold in the form of precious physical metal. You have to make sure that this is safely stored in as secure a way as you can. This is not a practical way of investing in precious metals, but there are still people who do buy such bullion. It makes for an investment that has very high liquidity and can be almost instantly cashed in emergencies.


Exchange traded funds or ETF allow an investor to put the money in precious materials that may or may not be held in physical form by the fund itself. You can also invest the money in stocks of mining companies that arrange for their financing from outside sources. The prices of these stocks will vary depending on the performance of these companies and can often lead to substantial profits in these investments. This does need constant tracking of the activities of the company and the effect it has on their stock prices.


The most popular precious metal that most people invest in is gold, and this makes it the most volatile. Silver and platinum are the next in choice for investors wanting to invest in precious metals. Gold is very volatile, and the more any metal is traded, it becomes difficult to predict its future worth. Gold can be held in physical form as bars, bullion or coins, but needs proper arrangements for security. When the precious metals in the physical form gets stolen, it is virtually untraceable, and your investment is lost. Platinum is not as popular with investors as gold is, though value wise, it is worth many times more than a similar quantity of gold.


The price of precious metals varies significantly over time, and this can cause significant imbalances in an investment portfolio. It, therefore, makes sense to keep investment in precious metals to a small percentage of one’s finances. Investing in precious metals has always been seen as a hedge against economic downturns, and as any economy shows signs of distress, the demand for precious metals increases and leads to a surge in their prices. Investing in precious metals is easy to make and just as easy to liquidate.


Investment by individuals in precious metals shields them against the effects of inflation and spiraling prices. Precious metals are considered recession proof investments and permit investors to protect their wealth when financial markets are unstable. Gold and silver have for centuries been a form of universally accepted currency for trade and commerce. Storing the physical structure of these metals is the best way of safeguarding your investment, and many agencies have set up depositories that have made it easy for the investors to store their gold, silver or platinum, securely.


You can also invest in these high priced metals by the purchase of securities whose value is secured by holdings in gold. This form of investment saves you the commissions you would have to pay for acquiring the gold in physical form. Banks also hold gold, which they allow people to invest in through a metal account. They sell parts of these physically help metals to investors at the present price in the market.


It must be understood that investing in precious metals is a long term way of increasing your investment. There can be long periods of stagnation that are difficult to anticipate, as are the sudden upsurges that can come from various factors like economic uncertainties, political happenings, and others. The value of gold is market determined, as is the price of other precious metals. Gold is continuously traded, and value of newly mined gold is minimal compared to the vast quantities of this precious metal that is hoarded by people all over the world in the form of bullion, coins, and jewelry. It is only when this hoarded gold is sold that the price gets affected, while the buying of gold can consistently drive up prices.


Exchange traded funds exist for all three precious metals, gold, silver, and platinum. They make for a very convenient way of purchasing these metals. Futures and options are another way to invest that offers excellent liquidity and can provide the most significant potential for profit, though it can just as well be a way that you can lose your money if you guess wrong. You can also invest in gold certificates issued by people who hold stocks of these metals. But this is a risky method as it involves a lot of trusts and with no real guarantees of investment.


Precious metals do uniquely offer protection from inflation, as they have intrinsic value, and carry no credit risk. There is no danger of inflation, as, like money, it cannot be just printed. It does come with its risks, as prices of these metals can drop, and in times of volatility, selling them can often be a challenge.


Precious metal investment is an excellent way to diversify an investment portfolio. Clear goals and risk profiles can harness the volatility of the metals to lead to accumulation of wealth.


About Me: Jeffrey Ito is the founder of and a graduate of the University of Southern California from Los Angeles, California with a Bachelors of Science in Industrial & Systems Engineering. In his spare time, Jeff teaches others the art of investing and uses meditation to achieve focus, clarity, and compassion in his life.