Investors, no matter their retirement plans for the future, should always seek to diversify their portfolios. Any reputable financial advisor would tell you the same thing. Particularly in this climate, with frequent crises, market crashes, and overall volatility.
Why limit yourself to paper assets only? There was a time when they were the only available choices, sure. But so many opportunities have cropped up in the meantime. And investors should take heed.
Most, if not all, investment companies now include precious metals in at least one retirement account. That’s because of their excellent potential as alternative assets. Click here for more.
People have used gold and silver (especially the first two) as money since at least 700 B.C., when Lydian traders minted the first gold coins. Over time, we learned to value other metals, such as platinum and palladium, using them for many practical purposes.
Now, these four metals represent the top choices for investors, especially gold and silver. Of course, these options aren’t for everyone. Some want to stick to the basics, and that’s perfectly fine. But expanding your investment options can do you a world of good.
Stores of Value
When choosing what to invest in, value is always the main priority. In other words, assets that promise greater worth and purchasing power in the future come first. Such an asset is typically known as a store of value.
Aside from currencies, precious metals fit this description perfectly, especially gold and silver. We expect stores of value to be useful whenever we need them in the future. And metals have always been consistent in that regard.
Analysis shows that the value of gold increases over time. Compared to the stock market, it is far more stable. This is why people often dub it the “crisis commodity”: it is there for you when other things go sour.
Also, compared to other assets, precious metals are very scarce. Take gold, the scarcest precious metal in the world. Experts claim miners dig up around 1% of new gold annually. It’s easy to see why investors appreciate it so much with such limited reserves. Silver, on the other hand, is even scarcer than gold in some places. This can easily be a problem due to its high demand, e.g., in the electronics industry.
Why is Gold Alluring?
Even though it’s a rare commodity, gold is still relatively easy to purchase. Once you’ve decided to try the yellow metal, you can buy it at a private dealer or mint, a government mint, a coin shop, a jewelry store, etc. The only thing you need is purchasing power. Also, many investors buy bullion from online dealers, who then send it stored in a vault. But considering all the online scammers, you should ensure it’s a reputable source.
We already mentioned the intrinsic worth of gold. But there’s something known as extrinsic or external value.
Let’s compare it to paper money for a second. Banknotes are tools for payment – period. That’s their only purpose in life (except maybe reminding you of past presidents and history.) Gold (and silver) is a different story. It has a variety of practical purposes: electronics, jewelry, medicine, dentistry, aerospace, etc.
Also, gold prices tend to rise when other assets go down. It’s incredibly useful in case of market slumps. Suppose an investor has put all their hopes in the stock market. In the event of a crash, there’s nothing to back them up. If you’re old enough, you might remember the inflation from 1980 that hit hard. During that period, gold was going through a real renaissance: at one moment, it was worth $800 an ounce. That’s roughly $2,900 in today’s money. (The current price is around $1,800 per ounce).
Going Down the Silver Route
Now let’s talk briefly about the second most popular precious metal option – silver. The number one reason that draws investors to silver is price. Namely, it’s always been cheaper than gold, so you can purchase a greater quantity for the same price.
Also, it’s less scarce than gold. According to geologists, silver is present nearly 20 times more than the yellow metal in the earth’s crust.
The second most important reason is practical application. Silver is the most widely used precious metal. Take a look at the flourishing electric auto and solar energy industries. Both make great use of silver because of its excellent conductive properties (the highest electric conductivity of all). For this reason, silver is present in most electronic devices, used mainly for contacts, printed circuit boards, and soldering.
When it comes to bull markets, silver performs better than gold. (Bull means rising prices.) Because it represents a much smaller market than gold, it’s much more volatile. That means the fall is greater in the bear market. However, when prices are soaring, silver trumps gold without fail. In fact, some predict a major surge to happen in 2023 because of the increasing demand for silver.
Hedge against Inflation
Growing inflation is the main reason why investors turn to precious metals. They need a hedge that will act as protection against unwelcome price fluctuations. And once again, gold and silver rise to the occasion. They provide much-needed peace of mind to investors who can never know what the future brings.
So what’s the key quality of precious metals that makes them so valuable during inflation? The purchasing power remains high over time. And the thought of having safe investment options with providers like Global Gold & Silver in times of trouble is incredibly comforting.
Here’s a practical example. We’re going through inflation, and the dollar is becoming less valuable. Logically, the price of gold goes up. In this way, the investor is hedged against the falling currency.
Also, gold and silver are highly liquid compared to other investments. That means you can turn them into cash much faster than usual. This, of course, is a result of their high value. High liquidity will be beneficial no matter where you are.
Summary
Considering how uncertain the modern financial climate can be, investing in precious metals is prudent. They’re predictable, consistent, and consistently valuable. That’s what you’re looking for when diversifying your portfolio.
