Investing in precious metals might seem simple. You just buy a bit of silver and gold, and that’s it. However, the more you learn about a topic, the more complex it gets. In this niche, there are a lot of subgroups of metals. There are gold, silver, platinum, palladium, and others.
All of them have their own qualities and their own benefits and drawbacks. Inexperienced investors might look at all of these options and become perplexed. If there are so many options to choose from, which ones are best. Should you get bars, bullion, or coins? Click here to read more.
Is a limited-edition coin a better option than traditional bullion, even though they’re the same price? How are they going to perform in the future? When it comes to analyzing the prices of gold, wise investors calculate a lot of options and factors.
Plus, there are a lot of shady vendors that will try to push you into buying collectibles and numismatic coins, which have high premiums. That’s good for their business because the premiums will not hold the test of time. That’s why we’re going to explain the thought process and the best things to do when it comes to investing in precious metals.
1What’s the Most Effective Way of Investing?
Every approach you pick has its own benefits and drawbacks. Plenty of investors are used to stocks, and that’s why they pick exchange-traded funds. This option is great because you have more control and liquidity over your assets. However, as the old saying goes, if you can’t hold it, you don’t own it.
When you invest in an ETF, you don’t truly own the metals. You don’t even have any rights to the precious metal that’s in the fund. Let’s look at a worst-case scenario. Precious metals have the highest price when a crisis occurs. For more information you can check this link.
This could be political unrest, war, hyperinflation, or a total collapse of the stock market. It’s not pretty to think about these situations, but they’ve happened in the past, and they’re going to happen again. The world is not all sunshine and rainbows.
That’s what the previous year showed us. A single pandemic had the capacity to halt the entire world. At that time, the prices of gold skyrocketed. If you have physical coins and bars, you actually possess the asset, and you have it outside of the banking system. This lowers your risks significantly. Getting the actual metals is a much better choice than anything else.
2Is Silver Better?
Even though both metals have appealing characteristics, newbie investors that wonder what is the best metal to invest in right now should stick to gold. History has proved that the yellow metal is the best medium of exchange, and silver has always been in second place. Ancient civilizations compared these two metals to the sun and the moon.
Both of them have their qualities and are used in different industries, but the cultural weight of the shiny yellow metal is always going to overperform the calm nature of silver. After a couple of years of tracking, you could expand your portfolio.
That could include both palladium and platinum. The latter is the most expensive metal on the planet because it’s the rarest of them all. When it comes to silver, it’s more tied to politics and economic activity. However, if you notice that the prices are lower than usual, that’s a time when you just buy. It’s also a better option for people that don’t have a lot of money but want to expand their portfolio.
3Should you Get Bars or Coins?
The best option for new investors is purchasing coins. A perfect example of that is the Gold American Eagle. It’s the ideal choice because it’s easily identifiable, easier to exchange, and you can sell them for a larger premium compared to gold bars.
Another choice is small one-ounce bars. They’re cheaper than bullion, but they’re much harder to sell when the time comes. You want to keep your assets close to liquidity. Plus, bars have much greater transaction fees compared to coins.
When it comes to storage, they’re pretty much the same. On the other side, bullion is something you should think about if you’re quite serious. This is best for institutional buyers or people that want to stock up on precious metals while prices are low.
4Testing the Metals
When you buy something quite expensive, you want to make sure that it’s not fake. There are loads of sleazy vendors that will try to slip something that’s counterfeit or close to the real deal. When it comes to silver and gold, they’re quite heavy and dense.
This means that if you have a trained eye, you can spot a fake from a mile away. Almost all fakes that weigh about the same have a larger volume and diameter. The first thing you can do is take a tape and measure the dimensions. If they’re genuine, then your mind can be at ease.
Another test is to get a jeweler’s scale and a set of calipers. You can go to official exchange sites and check the specifications settings. Then, compare the results to the numbers on the site. Another interesting test is the ping test.
When you hit a silver or a gold coin with another metal, you need to hear the familiar chime. That’s quite different compared to a quarter which is made from completely different metals. If you don’t hear a noticeable high-frequency chime, it’s probably a fake.
The same thing can be concluded from a dull sound. It’s like clinking a champagne glass versus crystal. To perform this test, take one coin and attempt to balance it on your fingers while striking it with another coin. If you don’t trust your ears that much, you can download an application that will hear the frequencies and then give you immediate and precise results. Technology has advanced that much.
5A Few Final Words
Managing a portfolio is hard. You often don’t know whether the choice you made is the best one. That’s why you need to spread it out as much as possible and invest in competing companies and metals. This is the best way to decrease risk and increase the return on investment.
At any time in the market, some stocks will go up, and others will go down. The same thing is true in the world of precious metals. When the buying power of the dollar goes up, the prices of metals go down. Look for an entry point that’s optimal and invest money that you can live without for the next five years.