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Precious metals have been a part of investment portfolios for decades. The rarity of precious metals contributes to their monetary worth, making them extremely valuable and desirable.
Gold, silver, and platinum remain the top three precious metals in the market for various reasons. Not only are they aesthetically pleasing, but they offer impressive durability and versatility. Certain precious metals, such as gold, make excellent electrical conductors, while the automotive industry highly values other metals like platinum and palladium.
When diversifying your investment portfolio, it can be challenging to decide which precious metals to avoid and which ones will create the best return on investment, or ROI. Although there is no one correct answer, there are various factors to consider before buying precious metals.
Determining which precious metals to avoid and which ones to invest in is not always a simple task. Although gold tends to be the most popular investment option, other metals such as platinum and copper have unique characteristics that make them a valuable investment. There are several factors to consider with different investment vehicles and portfolio goals to determine which precious metal fits your investment objectives best.
What Are the Different Types of Precious Metals?
When determining which precious metals to avoid and which ones to buy, it’s essential to know what makes each one valuable.
Gold
Investors have been favoring gold for years. Not only does it offer high utility value, but it also provides several financial benefits.
Gold is a popular manufacturing material due to its high heat resistance, malleability, and ability to conduct electricity. As a result, dentists, electronic manufacturers, and medical facilities consume around ten percent of the annual gold supply.
Aside from manufacturing purposes, gold is most well-known for creating beautiful and ornamental jewelry. In fact, the jewelry industry consumes 50% of the annual gold supply.
The remaining 40% of the annual gold supply goes to investors. Gold is a popular investment option as it tends to hold its value even when other investments drop.
Platinum
Platinum has more manufacturing value than investment potential. It makes an excellent catalytic converter material as well as high-quality jewelry.
One of the primary investment benefits of platinum is that it tends to avoid price swings. Since it is not a popular investment material, it can hold its price even during market dips.
Platinum is especially valuable as it is rarer than other precious metals. While gold production sits at about 2,800 tons per year, annual platinum production is only 250 tons.
Palladium
Palladium is a lesser-known precious metal that offers similar benefits as platinum. Although it is not used as much for jewelry, it makes an excellent manufacturing material for the automotive industry.
Like platinum, palladium is not a significant investment material and tends to hold a steady price in varying market conditions. This consistency helps investors further diversify their portfolios in precious metals investments.
Copper
The first thing many people think about when it comes to copper is pennies. However, copper also has several manufacturing and decorative uses.
As a precious metal, copper is a rare commodity that more and more investors are starting to buy. The demand for copper is continuously growing despite it being less monetarily valuable than gold or silver. The most popular copper investments include copper bullion coins and bars.
Physical Bullion Investments
When creating a precious metals investment strategy, many individuals choose to buy gold and other metals directly. Physical precious metals come in various forms that fit different investment objectives.
Bars
Investors can find gold, platinum, palladium, and silver bars at various dealers. Precious metal bars offer flexible investment options as they come in different sizes and weights.
Generally, the weight of gold bars will range from one gram to 400 ounces. Since silver bars are less expensive, they tend to start at one ounce for a single bar. Palladium, silver, and copper are available in various weights and sizes, depending on what the dealer offers.
Investors purchasing bars must also consider how they plan to store their precious metals, whether in a home safe or with a bank.
Bullion Coins
Precious metal coins are a popular investment option for collectors. The unique features of coins make them a highly valuable investment; however, it is essential to remember that the total value of coins includes both the collector and bullion value.
Most governments issue mint coins that range from a tenth of an ounce to one ounce. These mint condition coins are useful as legal tender, although most coin holders prefer to keep them for personal display.
An essential factor to remember is that the price of coins fluctuates with that of the precious metal from which they’re made. Premiums will likely apply when purchasing precious metals from a dealer.
Rounds
Rounds are similar to coins as they have unique characteristics that differentiate them from other precious metal investments. Most rounds are silver or copper and weigh up to five troy ounces.
Rounds make for a less complicated investment than other forms of precious metal, and so they are popular for new or young investors. In addition, the intricate designs found on rounds make them especially enjoyable to buy.
One of the most important things to remember when buying physical precious metals is to vet the dealer. Unfortunately, multiple fraudulent companies market their fake goods as real precious metals with a significantly reduced price. When searching for potential dealers, be wary of those who claim to sell precious metals below the market price.
When you do find reputable dealers, compare prices to ensure that you find the best value for your investment. Most dealers will also buy precious metals, but the premium will still apply.
ETFs and ETNs
When buying physical precious metals is not your preferred investment strategy, you can opt for ETFs or ETNs, which trade on the stock exchange. These products aim to imitate the price behaviors of each precious metal. For example:
- GLD is an ETF product that follows the price behavior of gold
- SLV is an ETF that follows silver’s price
- PPLT mimics the price action of platinum
ETN products follow the price actions of various other types of precious metals. Some ETN and ETF prices will rise as the price of certain metals rise. In some cases, ETN and ETF stock prices will increase when the precious metal price falls.
The primary difference between investing in ETF and ETN products and buying physical precious metals is having direct access to the commodity. Buying precious metals often comes with other responsibilities, such as storing and transporting the metal. As a result, ETN and ETF purchases tend to be more straightforward, making it easier for individuals to invest in various precious metals.
Options and Futures Investments
Individuals have the opportunity to invest in precious metals through options and futures. Buyers and sellers can take advantage of futures on exchanges while controlling a minor margin or down payment position.
Unlike futures, options do not have any obligation for individuals to buy or sell metals. With futures, both parties sign a contract that requires them to either buy or sell an asset (in this case a precious metal) on a certain date. Options are more flexible, but often lose value quicker.
Mining Equities
Along with options, futures, ETFs, and ETNs, mining equities give individuals the opportunity to invest in precious metals without physical purchases. Stocks in precious metal mining companies directly relate to the price of metals. As the price of the metals increases, the stocks will rise; as the prices fall, the stock will also fall.
An essential factor to consider when investing in mining equities is the risk potential. Essentially, purchasing a precious metal stock is betting on the mining company’s production. The stock could drop if the company has low production or management issues.
Choosing Your Investment Vehicle
Choosing which precious metals to avoid and which ones to invest in depends on various factors. Each type of precious metal offers varying benefits and drawbacks to fit different portfolio objectives.
When it comes to investment vehicles, there are two primary methods:
- Buying precious metals from dealers
- Investing in mining companies through funds
When purchasing physical precious metals, it is essential to find a reputable dealer. Potential investors must also consider how they plan to store their metals, whether at a financial institution or in their own homes.
Directly purchasing precious metals tends to have a lower risk than investing in funds. However, funds are generally less complicated and make it easier for investors to diversify their investment portfolios.
Investing in precious metals is an excellent way to promote diversification and potentially increase the value of your investments. When you are ready to start investing in precious metals, the Oxford Gold Group is here to help.
Our team consists of experts in the precious metals field and can help you find your ideal investment vehicle. We can help you determine which precious metals to avoid and which ones to buy to improve your portfolio and maximize your ROI.
From retirement plans to new investments, the Oxford Gold Group can help you diversify your portfolio and secure your financial future. Get started today by calling (833) 600-GOLD.
