Precious metals have been relied on as stores of wealth for thousands of years. In times of instability and crisis, they have historically been considered a safe haven, used to preserve wealth and add security to an otherwise uncertain financial future.
Precious metals have inherent and intrinsic value because they have utility, and because they’re tangible and finite resources that don’t rely on any government or financial institution for their value. They cannot simply be printed on a government’s whim, like paper currency. This gives precious metals a unique advantage and results in numerous benefits for investors.
Want to learn more about the benefits of investing in precious metals? Here’s everything you need to know about investing in precious metals. For more information on investing in precious metals within an IRA, you can check out our precious metal IRA guide.
What are precious metals?
Precious metals are metals known for their rarity and value (as opposed to “base metals” which are both more common and less costly). Precious metals offer both high economic value and a great deal of utility. Despite their value, they’re used for a wide range of purposes, from jewelry to investing, manufacturing to medicine. The most frequently traded precious metals are gold, silver, platinum and palladium.
A metal becomes a precious metal because of its physical properties combined with its rarity. For example, the unique color of gold makes it a popular and traditional choice for jewelry. Both gold and silver are among the most effective conductors of electricity (silver is more conductive, but gold doesn’t tarnish). Platinum and palladium are extremely useful as chemical catalysts, and palladium has a strong affinity for hydrogen, which makes it an essential metal in a number of cutting-edge energy applications.
All four precious metals are “noble,” meaning they are incredibly stable and non-reactive, which explains their use in medical devices, dentistry and related technologies. (Ever wonder why “silverware” is made from silver? It’s because silver doesn’t react chemically with foods, so doesn’t change the flavor. Professional ice cream tasters use golden spoons for the same reason!)
A great deal of electronics devices, such as smartphones, computers and integrated circuits (the “chips” found in virtually every consumer electronic) incorporate precious metals.
Are precious metals a good investment?
In today’s world, precious metals are commonly used as an investment or a way of saving, storing up purchasing power for the future. There are several advantages of investing in precious metals, but it’s important to consider your financial situation, your investment strategy, and your overall goals. One benefit of precious metals is that they’re resistant to monetary inflation because, like all commodities, they have intrinsic value derived from their utility. Precious metals often do well in times of economic or political strife, which gives them their “safe haven” investment reputation.
Benefits of investing in precious metals
Precious metals may be a great investment option. There is a wide range of benefits to investing in precious metals, such as security, liquidity, and growth potential. So, why invest in precious metals over other types of investments? Check out some of the benefits of precious metals below.
Because precious metals are real, tangible assets, their performance doesn’t follow general economic trends in lock-step. This means diversifying your savings with gold and silver can add an additional level of security for your wealth – regardless of the blunders of Washington, Wall Street, and beyond.
Few assets offer you and your family protection from political and economic uncertainty like precious metals. Gold, silver, and other precious metals can help safeguard your wealth from a variety of threats, such as the decline of the U.S. dollar or a political crisis.
Diversifying your savings is a fundamental investment strategy. Most investors see their account balances fluctuate wildly from moment to moment in today’s hyper-connected, globalized world. This is one reason why many people diversify their savings with precious metals – to avoid putting all their eggs in one basket.
Hedge against inflation
As the dollar’s value continues to decline, many Americans use precious metals as a protection or “hedge” against inflation, preserving their purchasing power for the future. In fact, as the Fed prints money in times of economic distress (for example, during the Covid-19 pandemic), the resulting loss in value suffered by the dollar tends to increase the value of metals like gold.
Your investments are your business. Precious metals offer unique privacy not found in many other types of assets. When making a cash purchase for home delivery, ownership of your precious metals is completely private. Because the metals are in your possession, your portfolio does not need to be accounted for by the government, bank, or financial institution.
Some forms of precious metals, such as gold bullion, are valued almost entirely by their metal content and weight, making them tangible, extremely liquid assets. In fact, precious metals are among the most liquid physical assets possible to hold as an investment. And when you buy them for physical possession, you always have access to them.
As finite resources, precious metals have unique growth potential. Gold and silver have provided tremendous returns in the past, and many analysts believe today’s prices are a bargain. For some investors, this makes precious metals an attractive alternative to placing their money in low-yielding bonds or stagnant savings accounts.
The demand for gold is everywhere – nowhere more so than from governments themselves. From 2010 to 2017, national central banks purchased an average of 459.6 tons per year. China’s central bank has recently increased its purchases of gold by a substantial amount — to hedge against the billions of dollars in paper assets it holds but no longer trusts. Even countries such as Russia, Turkey, and Ukraine are taking on more gold. Global central banks set a historic record in 2022 when they bought 1,136 tons of gold, the most ever in a single year. The demand for precious metals will continue to rise, not only from nations and investors but also from the numerous industries that use the metals in their manufacturing every day.
As the demand for precious metals is increasing, supply is decreasing, thus naturally pushing their value higher over time. Around the world, many large deposits and high-grade gold have been discovered – and yet these metals continue to be sought after for use in medicine, machinery, and a myriad of other applications. You don’t have to be an economics whiz to predict what this could mean for the value of gold in the years ahead!
What are the risks of investing in precious metals?
While no investment is completely risk-free, precious metals have a long history of providing stable returns as an investment. Because precious metals aren’t controlled by a government and thus are less correlated with political and economic swings, they tend to be a reliable long-term investment.
However, there are a few potential risks to investing in precious metals. For example, geopolitical events and mining supply can cause the price of precious metals to fluctuate due to supply and demand. Knowing the risks are important to ensure you’re making an informed investment decision. However, over the centuries, precious metals have been a more reliable store of value than any other form of money we know of. Because these metals have intrinsic value, historically, they have remained stable even during uncertain times, and that includes a value that increases with inflation over time.
Types of Precious Metals
When people talk of precious metals as investments, they are generally referring to gold, silver, platinum, and palladium – each of which has its own unique benefits and can be purchased for physical possession or placement in a Precious Metals IRA. Here’s a quick background on each metal and its common uses.
Gold has been a highly sought-after symbol of wealth since the beginning of recorded history, often used in jewelry, art, coinage, and many other applications. Because it is malleable, resistant to corrosion, and electrically conductive, gold also has practical uses in numerous industries.
Gold has been used as an investment vehicle for centuries and is used primarily as currency and in jewelry across the world, with its price affected by both supply and demand, as well as sentiment. Many investors tend to turn to gold during times of economic uncertainty, as it can be used as a hedge against inflation during political upheaval or economic downturns.
As an investor, you can invest in physical gold coins, rounds, or bars, or you can speculate on changes in gold prices on a commodities exchange. However, it’s important to understand the benefits of physical ownership before making the decision that’s best for you..
Like gold, silver has been used for generations in jewelry, tableware, coinage, and numerous other items. Its malleability, heat and electrical conductivity, and unique luster make it practical for a wide variety of industrial, electrical, and manufacturing applications.
When it comes to investing, silver tends to be slightly more volatile compared to gold because of its store of value and use as an industrial metal. With that said, silver’s value can fluctuate based on supply and demand (it’s more volatile than gold). However, silver may still be a great investment option, as it’s a physical asset with intrinsic value and can be used to protect your current savings.
Platinum and Palladium
Platinum and palladium, both recognized by their greyish-white luster, are rare precious metals used in many similar applications as gold and silver. Platinum and palladium are both known for their great catalytic properties and are thus used heavily for industrial processes, as well as the manufacturing of jewelry and numerous other items.
Palladium is a platinum group metal that’s not as common as other types of precious metals. While gold, silver, and platinum are more commonly used in jewelry, palladium is more common in industrial applications. For example, palladium is used to create multi-layer ceramic capacitors (MLCCs) that are used in smartphones, computers, and broadcasting equipment. Despite being one of the lesser-known precious metals, palladium still can be an excellent investment choice.
Is gold a good investment for the long term?
A long-term investment in gold, either in an IRA or for physical possession, can offer several benefits – especially with so much uncertainty surrounding the dollar’s decline and the global economy.
Former congressman Ron Paul has said the following about why precious metals are a good investment, especially right now:
“I would think people who are in it for the long term, it looks to me like this would be a very good time to buy … I look at gold as insurance, and others might be just at a time where they can start buying their insurance against the dollar fiasco, and I would say this is as good a time as any.”
What is the difference between bullion and numismatic coins?
When investing in precious metal coins, you have two primary types to choose from bullion and numismatic. There are unique benefits to both, depending on your goals, but there are some fundamental differences between them:
Bullion coins are valued solely by their precious metals content and weight, making them attractive to investors looking for liquidity. Select bullion coins are also approved for placement in a Precious Metals IRA by the IRS.
Numismatic coins are those whose value is determined not only by their precious metals content but also by their rarity and condition. This makes them attractive to investors who are looking for added growth potential from those factors. Numismatic gold coins are defined as having been minted prior to 1933.
It’s also worth noting a third option popular with investors: Proof coins. While proof coins are also valued partly based on their precious metals content, they are also minted in limited quantities with higher production standards than their bullion counterparts. Therefore, their value is also influenced by their scarcity. Finally, some types of proof coins, such as the Proof American Gold Eagle and the Proof American Silver Eagle, you can place inside a Precious Metals IRA.
How Can You Invest in Precious Metals?
Are precious metals a good investment? Let’s look at the two primary ways you can invest in physical metals and the benefits of each:
Buying precious metals for physical possession allows you to store your metals however you choose – at home, in a safe, in a bank deposit box, and so on. You have complete access to your metals at all times and total control over your investment. You simply can’t get that level of peace of mind from most other investment asset types.
Precious Metals IRAs
A Precious Metals IRA combines the benefits of precious metals with the tax benefits of a government-approved retirement account. A variety of coins and bars from around the world are approved for a Precious Metals IRA. When you add metals to an IRA from Birch Gold Group, they are stored safely in a precious metals depository until you decide to take distributions from your account. A variety of other investment types can also be added to a Precious Metals IRA, such as stocks, mutual funds, real estate, mortgages, digital currencies, and others.
Deciding which way to invest should be based on your individual goals and circumstances. Some investors use Precious Metals IRAs for their retirement savings while also keeping additional metals stored at home or in a safe.
What factors affect the price of precious metals?
While precious metals are typically stable during uncertain times, there are some factors that can affect their price. These are the factors that most commonly affect precious metal prices:
- Economic conditions: While precious metals have often shown to be more stable than many other types of investments in terms of the effect economic conditions have on them, a downturn in the economy can affect precious metal prices. It’s also important to keep in mind that the current state of the economy may affect supply and demand and production costs.
- Supply and demand: Because gold is traded both as a physical asset and as a commodity, supply and demand can impact gold prices. The same is true for other types of precious metals; when demand increases and supply decreases, prices will increase.
- Geopolitical events: Geopolitical events may include wars, economic sanctions, and other conflicts. These events can affect consumer confidence and reduce the demand for precious metals, or they can make it difficult to keep up with the current demand.
Production costs: Different precious metals cost different amounts to produce in a refined form, and those prices can vary due to several factors. For example, when the cost of gold mine production increases, it can result in higher gold prices in some cases.
Buy Precious Metals with Birch Gold Group
Over the years, as governments have fallen, inflation has surged and currencies have tumbled, precious metals have remained a bedrock of stability and security. To learn more about diversifying your financial future with investments in physical gold, silver, platinum, and palladium, take the first step today: Request our free Information Kit or call us toll-free at (800) 355-2116.