Precious metals are an attractive asset to hold for a variety of reasons, but perhaps the biggest allure is the stability and safety they provide. Traditionally, precious metals like gold, silver and platinum have been considered a safe item to hold when other assets like stocks and real estate are going down. They are generally considered to be a hedge against inflation.
There are a few different ways that a person can invest in metals. Let’s look at 7 different ways that a person can take advantage of raising metal prices.
The most obvious way to own precious metal is to purchase the physical metal and hold it yourself. Holding bullion is considered by many to be the “safest” way to invest in precious metal because you own it yourself and can hold it in your hand. If times ever get tough, it can be easily traded for cash or goods. The value is determined by the spot price and its value is easily recognized. Silver and gold are the most common, but also platinum, palladium and other metals can be bought as rounds or bars ranging in weight from grams to kilos.
2. Rare Gold & Silver Coins
Another way that you can hold precious metals is by owning rare coins that are made from those metals. Old coins from many different countries were minted in both gold and silver. Some investors prefer actual currency because they have the potential to gain numismatic value due to their rarity that may exceed the value of the metal alone.
Just bear in mind that many of these coins are actually an alloy. For example, gold coins minted in the US are 22k, or 91.66% gold. The remaining alloy was silver and copper.
3. Gold & Silver mineral Specimens
One fun way to own gold and silver is to accumulate natural nuggets and specimens of the metal. These are the rare minerals just as they are found on Earth. They will generally have value amongst mineral collectors that exceeds the price of just the metal contained within them. However, you should know that natural gold does contain alloys and gold nuggets will vary in purity depending on where they are mined. Their value can also vary depending on rare crystalline formations, overall size, and other variables. This is a neat way to own gold and silver, but it does require some additional knowledge. Just as with bullion, you should be sure to deal only with established dealers in the industry.
4. ETFs holding metals
An exchange-traded fund is a low-cost way that you can hold investments within a traditional investment vehicle such as a Roth IRA or a traditional 401k. Some might consider this the safest way to invest in metals, since you don’t have to find a way to store it physically (safe box, under the mattress, etc.) or worry about it being stolen. Others who are not comfortable with the stock market might consider this the worst way to invest in metals. Your preference will depend on your comfort level.
5. Mutual Funds in metals
Mutual funds work similar to the ETFs above, except they are actively managed by someone who will make changes to the investments within the fund. For example, they many change the ratio of investments within the fund (i.e. sell silver, buy platinum) in hopes of increasing performance. You as an investor have no choice over these decisions, you simply have the choice of whether you want to own the fund or not.
6. Mining Company Stocks
Obviously the value of a mining company is directly correlated to the price of the metals that they are mining. While this isn’t technically owning metals, it is a way to invest that is directly tied to metals prices. You can also speculate on certain companies and potential mineral discoveries that may cause stocks to vastly outperform the price of precious metals. Of course, you could easily underperform too, so you need to be able to accept the risks.
Read: Uzbekistan’s Largest Gold Mine in the World
7. Gold Storage Vaults
Safe storage of precious metals is risky. While you may be comfortable keeping a few silver coins in your gun safe at home, the accumulation of thousands of dollars in precious metal should take serious consideration on its storage. For most, a safe deposit box at the bank is the best option. However, gold storage faults are another option. These are vaults that will hold your gold for you. Most charge a modest annual fee and provide good security and state-of-the-art safety measures to keep your metals safe. While your metals should be considered safe, most investors I know prefer their precious metals to be nearby and accessible for quick access.
What is Best?
The best way to invest in precious metals will depend on the person. Some will prefer the quick and easy access to bullion stored in a gun safe at home. Others will be comfortable with owning a Precious Metals ETF or mining stocks within their 401k.
Investment in precious metals provides security. For those of us who worry about the value of the US dollar and fear that our better days may be behind us, owning precious metals provides a peace of mind.
Next: An Introduction to Metal Detecting for Gold Nuggets