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For centuries, precious metals have been in high demand due to their unique properties and high economic value. Now, these rare metals are primarily industrial and investment commodities. In fact, precious metals are an excellent way to diversify your investment portfolio.
You may be wondering: What are the best metals to invest in based on today’s market and forecast? Can you add precious metals to an IRA? Are precious metal investments safe? This guide will answer all those questions and more, including which metals are the best for investing in.
The quick answer is that gold, silver, platinum, and palladium are the primary IRA-approved metals and are the best metals to invest in.
At Oxford Gold Group, we believe that every person should have the opportunity to benefit from a precious metal investment. Therefore, our primary goal is to provide our clients with all the essential information they need to know to make well-informed decisions regarding their personal investment strategy.
We’ll start this comprehensive guide with a summary of the latest market trends for precious metals.
IRA-Approved Precious Metals
Let’s discuss the different types of IRA-approved physical precious metals. Four precious metals are suitable for IRAs: gold, silver, platinum, and palladium.
Who doesn’t love gold? The shiny yellow metal has always been popular, particularly for jewelry. The atoms in gold are heavier, and the electrons move faster, creating a unique phenomenon of light absorption.
However, with the world investing in cryptocurrency, stocks, and online trading, is it still wise to make a direct investment in precious metals like physical gold coins? Yes, many investors choose to add gold to their portfolios.
Gold is also popular because it’s an excellent way to hedge against inflation (and deflation) and provides stability during economic and geopolitical uncertainty. All you have to do is perform a simple online search, and you’ll see how gold has held its value throughout the years.
Should You Buy Gold Coins or Bars?
Your choice of gold coins or bars depends on personal preference. However, some investors prefer to invest in coins because they often have a unique history, intricate designs, and a high level of popularity. On the other hand, gold bars provide more value for the money and are easier to store. Bars are also the cheapest way to purchase physical gold.
Silver is another precious metal that’s very popular for IRAs. This excellent conductor of heat and electricity is critical for electronics, jewelry, photography, and more. Its increasing demand coupled with its affordability makes silver an attractive prospect for many people looking to invest in precious metals.
Silver prices are lower than gold, making it an ideal investment for many Americans. Silver coins and bars also provide the same inherent value stability as gold and other precious metals during times of economic instability or when paper assets depreciate, like bonds and stocks.
Is Silver a Stable Investment?
Silver is a suitable physical metal for an IRA account, although it’s also available for direct investments. Plus, its use as both a commodity and a currency gives it even more stability, which is why it’s a common choice for investment portfolios. Unlike paper money, the government cannot print silver in times of economic downfall. It’s a limited resource, with only 560,000 metric tons left worldwide. Mexico, Peru, China, and Chile produce the bulk of the world’s silver.
While platinum may not be as popular as gold and silver for investors, its rarity has made the price soar above gold several times in the last decades. As you know, platinum is an important resource in the automotive industry, where manufacturers use it for catalytic converters to keep down greenhouse gas emissions.
Platinum is also an essential commodity within the healthcare sector due to its excellent biocompatibility. This unique property makes it invaluable for use in sensors, stents, catheters, RFID devices, pacemakers, neuromodulation devices, defibrillators, and more.
What’s the Best Way to Buy Platinum?
By far, platinum bars and coins are the most popular for investors. You can purchase platinum coins in weights between .333 ounces and one ounce, containing 99.95% platinum. Platinum bars are also a common choice for precious metal IRAs, including Credit Suisse and PAMP Suisse platinum bars. However, it’s ultimately your decision as to which form of platinum you’d like to add to your IRA or invest directly.
Many think of gold and silver when considering investing in precious metals. However, many more options are available for investors, including palladium, which is on the list of IRA-approved precious metals. Palladium is a platinum-group metal, but it’s rarer than platinum, making it a superior choice for the discerning investor.
Palladium is also necessary for creating catalytic converters, and with interest in renewable energy rising, it’s in great demand around the globe. However, you can also find palladium in the dentistry tools, water treatment, jewelry, and electronics industries. For example, mixing palladium with gold creates white gold, a popular metal within the jewelry market.
Most of the world’s palladium supply comes from Russia and South Africa. The demand for palladium worldwide far outstrips the supply, and it has done so for some time. As a result, palladium is becoming a very attractive opportunity for investors.
Is Palladium a Better Investment Than Platinum?
While palladium and platinum are in the same group of metals and look similar in appearance, they are different. Due to its demand within the automotive industry and limited availability, palladium prices are often higher than other precious metals.
However, many people prefer to invest in platinum over palladium, as the price tends to be more stable due to the frequent production limitations that affect palladium’s availability. If you can’t decide, we recommend investing in both platinum and palladium to diversify your portfolio.
Precious Metal Market Trends
Even in times of economic uncertainty, rare metals like gold, silver, platinum, and palladium retain most of their value and stay in high demand throughout the globe. Such metals have many industrial purposes that go far beyond jewelry. Common applications include electronics, automobiles, medical equipment, chemicals, aerospace and aviation, and many more. Of course, precious metals are also in demand for investment purposes.
According to data from Grandview Research, the precious metals market will likely grow at a compound annual growth rate (CAGR) of 9.0% from 2020 to 2027. For some perspective, experts valued the 2019 market for precious metals at $182.1 billion. Demand within the jewelry industry will significantly influence market conditions, particularly in foreign countries where gold and silver are precious commodities for marriages.
Of course, there are endless uses for these metals aside from jewelry and ornamental purposes. The precious metals market for gold and silver fluctuates for many reasons, such as changing lifestyles, environmental concerns, the pandemic, emission regulation, the economy, industrial demands, etc.
However, there’s no denying that both gold and silver prices have historically performed well, even during times of depression or economic downfall. In addition to direct investments, you can also invest in mining stocks, mutual funds, precious metals ETFs (exchange-traded funds), or in companies on the stock market that are focused on precious metals.
Why Should You Invest in Precious Metals?
So, let’s cut to the chase: Why are precious metals a good investment?
Increasing Demand: The fact that hundreds of industries depend on precious metals means that demand will only grow in the coming years.
Hedge Against Inflation: As the American dollar declines in value, precious metals have become a way for investors to protect against inevitable inflation.
Secure Investment: Many people prefer to invest in precious metals rather than the stock market, as they’re not under government control. This ensures their inherent value.
Portfolio Diversity: Many investors with large portfolios choose to add precious metals to diversify their holdings and protect against economic downturns and price fluctuations.
Finite Resource: Precious metals are a finite resource, and the Earth’s limited supply is decreasing steadily. As supply decreases, demand increases, pushing the value higher over time.
High Liquidity: Precious metals are liquid assets, easy to sell, and not subject to the numerous risks associated with other common investment types and paper assets.
Additionally, precious metals investments are wise because they have intrinsic value and don’t pose a credit risk. Most investors agree that these valuable metals are an excellent way to reduce the risk and volatility of their investment portfolios, primarily due to their growth potential.
Is Platinum good to Invest In?
Based on current market trends, if you want to buy precious metals, platinum is a superb choice. It’s a rare metal, about 20 to 30 times rarer than gold. According to the World Atlas, the top five countries that produce platinum are:
- South Africa: 68.32%
- Russia: 15.52%
- Zimbabwe: 6.83%
- Canada: 4.47%
- United States: 2.26%
As you can see, Russia and South Africa are the biggest platinum producers, driving the rare metal’s high value even further skyward. Why? Supply chains in these two countries are tenuous and often disrupted, either by political unrest or war. Those factors make platinum even scarcer, driving the value up.
Platinum is invaluable to the medical, automotive, and jewelry sectors, another reason why it’s such a good investment.
So, is platinum a better investment than gold and silver? Well, it can be. Gold tends to have greater stability regarding price movements. Still, platinum is rarer and integral to a growing number of industries, so the value will likely continue increasing in the future. However, that’s not to say that you also shouldn’t invest in gold, silver, or palladium.
Is Silver Demand on the Rise?
Traditionally, gold outperforms silver in terms of demand. However, that may be about to change. Silver has the highest electrical conductivity of all metals, which is why its use is so prevalent in electronic devices. However, its use in other industrial technologies is on the rise. A report by Global News Wire states that the use of silver in electronic devices and other electrical applications will likely rise from 224 million ounces (2020) to 246 million ounces in 2025, which is a 10% increase.
Electronics and communications aren’t the only technologies where silver use will increase. Radio-frequency identification devices (RFID) also depend on silver, and according to a September 2021 Market Trend Report by CRU International Ltd., that usage will drive a 400% increase through 2030. The rise in demand will inevitably affect silver prices, making it a popular choice for many Americans who want to invest in precious metals.
What Is Bullion?
Bullion is a physical metal that is pure or almost pure after refinement. The most common types include gold and silver bullion, although platinum and palladium are also available. Gold bullion is available in bars, ingots, or bullion coins, known as “rounds.” Gold bullion and silver bullion are two popular choices if you want to buy precious metals.
In general, bullion comes in fractions of a troy ounce, making it suitable for investors with a range of budget sizes. If you didn’t know, troy is a weight system for precious metals and gems and uses a 12-ounce pound rather than a 16-ounce.
Are Precious Metals Investments Risky?
Like any investment, there is some level of risk when purchasing precious metals. However, due to their high economic value, many people feel they make a “safer” investment than other choices, such as the stock market. However, the savviest investors know that diversification is the key to a stable portfolio.
In light of this, many choose to invest in more than one type of precious metal. For example, you may want a portfolio with diverse gold, silver, platinum, and palladium investments. The separation between those assets provides a balance against the risk in your portfolio. However, that doesn’t mean there is no risk associated with investing in precious metals.
Risks of Precious Metal Investing
Precious metals often have fluctuating price levels. Supply and demand are significant contributors and will change drastically based on factors such as mining supply. Another risk is storage. We recommend keeping your physical precious metals at a high-security depository, as home storage comes with the risk of theft.
Finally, physical metal doesn’t generate income. However, there’s no doubt that precious metals can be a stable investment, and you don’t have to pay any capital gains tax until you decide to sell, which we’ll discuss in greater detail later in this guide.
Can You Add Precious Metals to Your IRA?
Yes, you can add precious metals to an Investment Retirement Account, known as a Gold IRA or a precious metals IRA. Many Americans have chosen to invest in a precious metals IRA, which can include gold, silver, platinum, or palladium. A precious metals IRA is self-directed, although it comes with higher fees than a Roth IRA or traditional IRA that only invests in mutual funds, stocks, or bonds.
Traditionally, when paper assets like stocks and bonds tend to depreciate, the value of gold goes up, which is why many people invest in precious metal IRAs: It’s a balanced approach and lessens the overall risk of investing. After 2008’s financial crisis and the Great Recession, precious metal IRAs have increased in popularity. Prior to that, it wasn’t easy to invest gold into an IRA, although now you have many options.
Rules for Precious Metal IRAs
Investors looking to buy precious metals to fund an IRA can choose between a traditional or Roth IRA. Once you decide to invest with physical metal instead of other options, like an exchange-traded fund that tracks a gold index or a stock from a mining company, you must find a trustee.
The gold bars or coins must also meet IRA standards for fineness, and there’s one more catch: you may not store IRA precious metals at home or even in a safety deposit box. Only direct investments in precious metals can qualify for home storage. Instead, the precious metals in your IRA must reside in an IRS-approved depository.
Are There Any Fees Involved with Precious Metal IRAs?
Precious metal IRAs are subject to certain fees, including:
Storage Fees: The law requires you to store precious metals from your IRA in an IRS-approved depository. These facilities often charge storage fees.
Custodian Fees: As with any IRA, those with precious metals are subject to a custodian fee.
Cash-Out Fees: If you close out your precious metal IRA by selling to a third party, you may lose some of your investment unless current market prices are much higher than when you initially purchased.
Seller’s Fees: Fortunately, seller’s fees are only a one-time occurrence. However, your markup will vary depending on whether you choose gold coins or bullion.
Account Setup Fees: You’ll also be subject to a one-time IRA account setup fee. The cost will vary based on the company you choose to handle your IRA investment.
Choosing a Company to Buy Your Metals
If you want to invest in precious metals, how can you find the best company to handle your investment? Here are a few criteria that you should consider before investing in precious metals:
Reputation: Before deciding which metal to invest in, you should look for a company with a stellar reputation. Look at customer reviews and check objective third-party sites like the Business Consumer Alliance or the Better Business Bureau. At the Oxford Gold Group, we’re BBB-accredited and are proud to maintain a perfect A+ rating.
Qualifications: Look for a company with the proper registrations, licenses, bonds, and insurance to ensure that your precious metals stay safe.
Full Disclosure: A reputable company will have complete transparency and disclose all of its fees upfront—before you invest.
Flexibility: We recommend choosing a company that offers flexible investments, giving you options when it comes to precious metals.
Finding a reputable and well-established company is an important part of your research. Every investor wants to have peace of mind that they made the right decision, and choosing a top-rated company will help ensure that.
Taxes and Investing in Precious Metals
The Internal Revenue Service (IRS) categorizes physical precious metal holdings as collectibles, subject to the capital gains tax. Therefore, you’ll have to face that tax whether you own your metal in bars, ingots, coins, or any other form. However, the tax only comes into play after you sell the physical metal and if you’ve owned it for over one year.
Additionally, selling physical precious metals means you’ll face a different tax rate than with financial securities, such as ETFs, mutual funds, or stocks. The IRS taxes physical precious metal holdings at your marginal tax rate, up to 28%. So, if your tax bracket is in the 33%, 35%, or 36.9%, you’ll only have to pay the maximum of 28%.
Finally, the amount of tax you owe on precious metals will depend on the cost basis of the actual metal. Investors who purchased the metals directly will have a cost basis equal to the amount they initially paid.
Final Thoughts on Investing in Precious Metals
Here at Oxford Gold Group, we want our investors to be well-informed before making any purchases, whether for a direct investment of physical metals or to fund an IRA. Precious metals are popular because they provide greater security than other investment types, such as stocks, bonds, and mutual funds.
When the value of paper assets declines, the value of precious metals tends to increase. So while investing in precious metals carries risk, that’s also true of any other investment type. However, the inherent value of precious metals and the increasing demand for a wide variety of technologies worldwide make them a safer choice for investors, especially compared to volatile investment types such as the stock market.
Contact Us at The Oxford Gold Group
If you want to learn more about how to invest in precious metals and what the best metal to invest in is for your unique needs, contact our experts at Oxford Gold Group today. We can set up a new tax-free Gold IRA account to transfer funds from your bank, roll over other retirement accounts or IRA’s, or convert your investment into the precious metal of your choice.