Are precious metals a good alternative investment?


Considering the economic turbulence that the world is currently witnessing, it shouldn't be very difficult on your part to assume that the only way of lessening the financial uncertainties of the future would be investing as much as you can. According to investment experts, you should never pour your resources into a single plan. Rather, to be on the safer side of the spectrum and evade the inherent risks of the investment market, you must resort to diversification.

Before finalizing your decision, what you must realize is that not all the major pillars of the market will crumble down at the same time. This implies that the better you are with the diversification of the investment portfolio, the more will be your chances of multiplying the value of your assets over time.

Now, to answer your question of whether or not precious metals are a good alternative investment in the most simple and straightforward way, we will have to say yes. Most people who invest in precious metals such as platinum, gold, and silver intend to dodge the unavoidable and unforeseen fluctuations in the global economic landscape. Simply put, the chief objective here is to preserve the wealth in the form of gold and other precious metals during times when it becomes rare or cannot be created.

If you are relatively new to this domain of investment and need a deeper insight to understand things, we will help you with that.

What are the precious metals?

A suggested by the name itself, precious metals are the ones whose demand exceeds way more than their availability. Additionally, in order to tag a metal as precious, it must have a finite supply and economic value. As far as the economic value of the metals is concerned, it can alter corresponding to the requirements put forward by manufacturers and investors to produce important items. Even though there are a few distinct metals that are qualified as precious metals, only four of them, namely, gold, silver, platinum, and palladium grab the attention of the investors the most. 

  • Gold

Gold is hands down, the first choice that comes to people's minds whenever they hark back to the recourse of investing in precious metals. It is essentially the lack of practical uses that has surged the value of gold in all these years. The practice amongst investors is to buy gold in decent chunks and tuck them away to create scarcity in the market and thus, increase its worth.

  • Silver

The second most viable choice of investment in the category of precious metals has to be silver because it tends to change its value by the same percentage as gold. Having said that, you must be wondering if the proportional value is the same, why does it cost only about 1-1.5% of gold. It is because silver comes with innumerable prospects of application and has a stable demand in the manufacturing realms. Thus, to comply with the rising demands, more silver is mined which, in turn, keeps the price low.

  • Platinum and Palladium

The value of platinum is much more than silver as it costs somewhere around 60% of gold's price. On the other hand, the popularity and price of palladium are only swelling by the day and commonly included in the group of platinum metals like rhodium, iridium, osmium, and ruthenium.

Where does the value of the precious metals stand in the present day?

Honestly speaking, the value of gold has only augmented with each passing year. Today, one ounce of gold costs $1,952 whereas, in 2019 and 2018, the prices were at $1,500 and $1,300 respectively.

For the uninitiated, there are fundamentally two other graphs that influence the value of gold over time.

  • Oil prices- the value of gold is directly proportional to this
  • Inflation- gold prices rise with inflation although the latter causes an impact because of increased interest rates.

Therefore, if the value of the overall investment portfolio starts depreciating, the prices of gold will inexorably rise and bring about more profit.

Similarly, the price of silver is $26.71/ounce and that of platinum is $825.33/ounce and both of them rise upwards with the price of gold.

However, you should bear in mind that manufacturing innovation can affect the prices of these metals individually. For instance, if a certain manufacturer comes up with an idea that requires a colossal supply of silver thereby, making way for a sudden increase in demand, its prices can start plumping uncontrollably.

As opposed to this, if people come with a cheaper or more practical substitute of silver and the use of the real material becomes archaic, its price will crash like never before.

Advantages of investing in precious metals

  • The first and the most glaring advantage of investing in precious metals is that their scope of creating income is indeed high. If you compare the prices of gold and silver in 2020 with the ones that were quoted in the preceding year, you’ll discover a whopping 30% rise which is an impressive ROI.
  • Investors hardly invest in precious metals with the goal of fetching income; instead, they try to derive their profits by guarding the value of the metals for retirement. If you check past records, it will become clear that inflations have had severe repercussions on stock and bond markets, some of which were even irrevocable. If you ditch the idea of investing in precious metals and empty your resources in any of these markets, you will only expand the probabilities of losing a lot of asset value.

In contrast to this, the value of precious metals inclined towards increasing during inflation. Nonetheless, their prices seem to stabilize within the window of $1,000-$1,200 when the forces of inflation begin to normalize and the market buckles up to get back to its normal state.

  • If you have invested in other areas, the profits ensued from the precious metals can make up for the losses experienced by them and guarantee a firmer hold over the market.




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