Today, precious metals have a soft spot in the hearts of investors, with gold and silver being recognized as having the most value. That said, the question many find themselves asking is, do you consider silver as an investment or gold? If you’re new to the precious metals market, keep reading for an overview on how they work and the ways in which you can invest in them. As of late, there are a number of ways, and reasons, for investors to start both gold investing and silver investing.

Gold is Unique.

As the old saying goes, all that glitters is gold. Known for it’s ability not to rust or corrode and it’s ability to conduct both heat and electricity, gold has numerous industrial applications. But, it is most known for its use in jewelry or as a type of currency.

Overseen by the marketplace, gold’s value is determined 24 a day, seven days a week. Generally speaking, gold trades as a function of sentiment and it’s price is not overly affected by supply and demand, as a result of above-ground gold outweighing new mine supply. To simplify, those who hoard gold will feel like selling and then the price will drop. If, however, they want to purchase gold, new supply will get rushed and then prices will increase.  

There are a number of reasons that investors would feel the need to hoard gold, such as:

1. Financial Concerns:

At times, banks and money are thought to be unstable, and when this occurs, gold is thought to be a safe route.

2. Inflation:

When rates of return are negative, in either equity, bond, or real estate markets, people will rush to gold as it is an asset that tends to maintain its value.

3. Crisis in War or Politics:

Many enter a gold-hoarding mindset when dealing with crisis in war and politics. For instance, an individual could turn their life savings into a gold investment or put it in silver as an investment and then when the time comes, they can then trade it for food or shelter.

Biting the Silver Bullet.

If you need silver investing advice, keep the following in mind. The price of silver, unlike gold, will fluctuate between its two roles as a store of value and as an industrial metal. As a result, fluctuations in price in the silver market are much more erratic than those in the gold market.

Even though silver trades as an item to be collected and hoarded, similar to gold, the industrial supply and demand equation of silver also plays a defining role when influencing price. This equation of supply and demand has always changed whenever new ideas or technologies were introduced, such as:

– Silver once had an important role in the photography industry (silver-based photographic film) but it’s accomplishments have now been surpassed by the introduction of the digital camera.

– The up and coming market economies in the East saw the rise of a vast middle class. This rise resulted in an intense demand for electrical appliances, medical products, and numerous other industrial products which required the input of silver.

– Silver has an important use in batteries, superconductor applications and various microcircuit markets.

It’s worthwhile noting for anyone considering silver as an investment that the price will be affected by its products and this is not a precious metal that is solely used in fashion or as a store of value.

Platinum.

Platinum, like gold and silver, is traded on global commodities markets 24/7, but this precious metal tends to have a higher price than gold during certain periods of market and political stability. The higher price is mostly because platinum is much more rare. That said, there are a number of other factors that determine the price of platinum, such as:

– As an industrial metal, most of the demand for platinum comes from automotive catalysts (events that bring the price up or down). Following this, most of the demand for platinum comes from the jewelry industry. Aside from jewelry and automotive catalysts, the rest of the demand comes from the computer industry as well as petroleum and chemical refining catalysts.

– The auto industry heavily relies on platinum, therefore, prices are often determined by auto sales and output numbers. Even though the “clean air” legislation could require automakers to have more catalytic convertors, which in turn will increase demand for platinum, American and Japanese car makers turned to recycled auto catalysts or started using the metal, palladium in 2009.

– South Africa and Russia are the two countries that have heavy concentration of platinum mines. As a result, there is more potential for cartel action that would support, or raise, platinum prices.

 

Investing in Precious Metals.

Here is a list of five available options precious metal investors can choose from:

1. Commodity Exchange-Traded Funds:

   Even though ETFs are available for silver, gold, and platinum, as of 2009, investors are required to trade on the London Stock Exchange in order to access an ETF for platinum.

2. Mutual Funds and Common Stocks:

   If you do not know how mining stocks are valued, many will find it easier to stick to funds with managers that have solid performance records. This is because the shares of precious metals miners are leveraged (using borrowed money) to precious metals price movements.

3. Futures and Options:

   For anyone looking at silver as an investment, or for those wanting to start gold investing, know that futures and options markets will offer you leverage. It is also important to note that both the greatest profits and losses can be made with derivative products (the price of this product is derived from multiple underlying assets).

4. Gold and Silver Bullion:

   Here’s a piece of gold investing advice and silver investing advice; only invest in coins and bars if you have a place to hold them. If you expect the worst, go for it, invest in bullion, but, if you have a length of time over which the investment is held, bullions can be aggravating.

5. Certificates:

   This is an attractive option for those who want the benefits of owning gold but do not want to deal with storage or transportation issues. That said, don’t invest in a certificate if you want insurance in a real crisis as they will not be accepted.

 

Are Precious Metals Right For You?

Precious metals have numerous benefits, such as having intrinsic value, carrying no credit risk and they cannot be inflated, meaning that you can’t print more of them. Additionally, precious metals offer insurance against financial or political crisis.

Also, precious metals have low or negative correlation to asset classes such as stocks and bonds. What this means is that precious metals in a portfolio, even if it just a small percentage, will help to reduce risk and fluctuation.

The Bottom Line:

If you’re thinking about gold investing or silver investing, know that precious metals will provide investors with an efficient means of diversifying their portfolio. To succeed in this sector of the market, make sure that you spend the time assessing your goals and all the risks that would be involved in the investment.

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