Getting into the precious metals market – a beginner’s guide

If you have spent any time looking at the different options for financial planning and investing, the chances are you’re already aware that precious metals such as gold or silver can represent an excellent way to diversify your portfolio. In other words, they allow you to spread the risk, such that if one subset of your investments loses value, another will increase.

Precious metals are ideal in this respect, as they have a proven track record of delivering consistent long-term returns. The fact that everyone knows this and tends to rush into buying gold and silver at the first sign of financial trouble almost makes this a self-fulfilling prophesy, as the increased demand further drives up prices.

Nevertheless, knowing it makes sense is one thing, knowing where to start can be another. The following overview will get you off on the right foot.

What metal are we talking about?

Precious metals are, by definition, ones that are naturally occurring and relatively scarce. Obvious examples are gold and silver, and these have had value and prestige throughout history.

However, it is not all about jewelry and coins. Gold and silver have many industrial and medical uses, and these are increasing as technology marches ever onwards, further driving up prices. Industrial demand has also brought other precious metals, such as platinum, magnesium, palladium and zirconium to the fore.

Isn’t this a little old-fashioned?

Given that we now operate in an age of paper money and even virtual currencies like Bitcoin, you might think precious metals belong to a bygone investment age. The point about fiat currencies, though, is that they are completely exposed to socio-economic and political factors. Nobody has a crystal ball, but history has shown us that currencies can collapse under their own weight in extreme circumstances. It has happened numerous times over the centuries and will almost certainly happen again.

Yet gold, silver and the rest have not just held steady under these circumstances, they have typically escalated in value. When the going gets tough, precious metals have always been seen as a safe haven, and that is not going to change any time soon.

How to get started

Any investment strategy needs to be carefully thought-out and should follow a strategy that incorporates sound risk management principles. So before you do anything, think about the proposed investment in the context of your overall portfolio. What are your aims, how much will you invest and what are your liquidity needs? This last question is particularly important, as it will dictate the form of precious metal you might buy. Trading companies like Golden Eagle Coins can supply anything from silver dollars by the bagful, which can be easily converted back to cash as needed, to large gold bars worth tens of thousands of dollars each.

The most important point is to make sure you buy from a trusted and recognized source. Unfortunately, there are scammers in every walk of life, so avoid buying from private individuals unless you are completely confident that they are on the level.

 

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