How to Invest in Gold and Precious Metals

Contents

As a trader in any kind of markets, there is always value in the long term. This is particularly true when markets are volatile and unpredictable as they are currently. When there appears to be no clear direction, or you just want to make an investment which will be safer over time, gold and other precious metals have always been a popular choice.

At the present time, these markets, gold in particular, are continuing to reach new heights all the time. Here we will take a closer look at exactly how you can invest in these markets, and why it may be wise for you to do so even as a new trader.

What Does Each of These Markets Have to Offer

Let’s take a closer look at exactly what is on offer when you invest in some of the most popular precious metal markets, and what the key components are which can make them tick. We will focus on the three most popular markets for traders which are gold, silver, and platinum.

Gold

The gold standard. This is the number one precious metal for traders around the globe. Of course it has a vast range of practical applications from jewelry, to use in electronics, and even still being traded as a currency or being held in reserve to back currencies around the world. There are several reasons why this is the case, and why gold is so attractive not only to wear, but also to invest in. There are several are several things which may prompt changes in the price given that it is not impacted by supply and demand to the extent of other assets. These include:

Financial Uncertainty: When other economic and trading markets are down or in times of difficulty, gold has long been the safe haven where traders flock to in search of security. The same is true in today’s market which has seen gold prices continue to skyrocket.

Geopolitical Concerns: Another sentiment-related factor. When a country or area is experiencing political upheaval or any other kind of social crisis, gold is the go to resource which is an easily portable instrument of wealth that can hold value.

Inflation: Particularly during periods of time where interest rates are low, or inflation is at a peak, and the rates of return through other markets are minimal, then you will find a push to invest in gold, again making use of its safe-haven status in terms of vale.

Silver

More so than gold, the price of silver tends to fluctuate based on its practical uses, though it is still somewhat protected from a regular supply/demand fluctuation based on the amounts of the precious metal which are hoarded around the world.

Silver tends to have a very high demand due to its use in all forms of electrical appliances and circuitry. These are practical uses that really help in both driving demand for the metal, but also ensuring that it too retains a certain level of safe-haven investment status above other instruments and metals.

Platinum

Platinum is also very well-traded in terms of volume on the global commodity markets. In fact it can typically trade at higher prices than either gold or silver due to its rarity. Since the main use of platinum is within catalysts for the auto industry, the demand, and thus price of platinum can be closely linked to the trade in new cars. In recent years though, palladium, another of the top traded precious metals has proven to be a reliable substitute in this respect.

As with the previous two, demand in the jewelry sector is also high for platinum among a range of other precious metals, though their true impact on the asset price is never as large as for other industrial uses.

Ways to Invest in Gold and Other Precious Metals

It is not as challenging as you may think to invest in gold and other precious metals. Here are a few of the most common ways in which traders can get involved in these markets:

Commodity ETFs are probably the most popular and accessible way in which you can invest in gold, silver, and these other metal markets. These exchange traded funds exist for all of these major precious metals and are easily traded through the vast majority of brokers, sometimes as CFDs. In any case, though you will not have access to the underlying asset, you still have a convenient, and liquid investment linked to these markets.

Stocks in mining companies and others linked to these precious metals can be a good way to exploit movements in the price of the metals. With that said, though they can be closely interlinked, there are still other complexities associated with investing in such stocks. Even when gold prices are high, and the industry is thriving, a mining company could go out of business.

Futures & Options are typically where big money is won and lost on these commodity markets. This is trading on the prices of the commodity at a certain date in the future, or options to buy the physical asset at a specified time. Both of these trading markets could see you left with a real stack of precious metal if the contracts expire, though this is rarely the case for retail traders.

If you want more physical, hands on ownership of these precious metal assets then you could invest in certificates which prove you have ownership of the underlying asset, though these are certainly more illiquid than the other forms of trading described, or finally, if you have a vault or secure storage location, you could invest in the real bullion itself. This means gold bars, coins, and similar items. These may be the most secure in terms of being transportable, and verifiable, though they are absolutely the most cumbersome, and least liquid when it comes to resale.

Who Should Invest in These Markets

Of course they have risks in trading as described above, but gold and other precious metals to an extent have the privilege of being market-proof. This means that throughout the course of history, no matter what has happened, these metals have always retained value.

With that thought in mind then, if you are a trader looking for a very secure asset which will certainly hold its value, and be inflation proof, then these precious metals are a choice for you.

They are a safe haven and secure investment, albeit a conservative one, for traders all around the world and have been so for generations.

Final Thoughts

With more insight into the markets, we hope that you can now understand more about exactly how you can invest in gold, silver, and other precious metal markets. Certainly from the outside it may seem like there are a lot of obstacles to overcome, but in reality, investing in these markets can be done quickly and easily through any top broker, and is just as convenient as trading any other market.

Not only convenient, but gold and others are  safe-haven markets thanks to their consistency in performance and value, something which is all the more important in the market of today.

About the author

Kate Leaman

Kate Leaman

Kate Leaman is the Chief Analyst and author at InvestorGreg. She won the Sky News Fiona McDiarmad award and subsequently became a journalist for Sky News. Read more

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