How to Build Wealth by Investing in Precious Metals

If you’re looking for a way to protect your investment portfolio from market volatility or your savings from inflation, you should consider diversifying into precious metals. Precious metals, like gold, platinum, palladium, and silver, have intrinsic value that is not tied to the stock market or the value of the local fiat currency. Silver, palladium, and platinum are widely used in industry, while both gold and silver have historically been used as a means of storing wealth and as a currency. Even today, some people will stockpile gold and silver to be used as a currency in case of political and social upheaval, war, and economic collapse.

Precious metals can be a sound investment tool and a great way to build wealth over time. You can buy the physical metal itself, or you can get precious metals exposure from mutual funds, exchange-traded funds, and even common stocks in mining and streaming companies.

Choose the Right Precious Metal for Your Portfolio

Gold is the traditional choice for investors looking to diversify into precious metals. Many investors choose to buy gold because of its reputation as a safe investment vehicle. However, gold may not be the right precious metal for your investment needs.

It’s true that the price of gold keeps pace with inflation, but that’s true of other precious metals, too. The price of gold tends to stay stable, because it’s mostly used in the jewelry industry and as an investment vehicle. Other precious metals, like palladium, platinum, and silver, have more industrial applications and, as a result, their prices can be more volatile.

Palladium and platinum are rarer than gold, because they haven’t been mined for jewelry for thousands of years. They’re mostly used in industrial applications. An ounce of palladium or platinum will typically cost more than an ounce of gold, but factors that affect the industries these metals are used in can also affect their spot prices. For example, when demand for electronics goes up, so does the price of palladium and platinum.

Silver can experience similar fluctuations in spot price due to industry factors. When photographic film went out of style, for example, silver prices fell because the demand for silver in the photography industry also dropped. Silver also has a much lower spot price than other precious metals, so if you don’t have much to invest in precious metals, you can buy an ounce of silver for a couple hundred dollars, instead of the few thousand you’d pay for gold, palladium, or platinum.

Which precious metal is right for your investment strategy? If the future you see ahead of you is one in which paper currency no longer holds value, then you probably want to buy gold or silver and you’ll want to buy it in bullion that you can store at home in a safe or at your local bank in a safe deposit box. Gold and silver are recognizable as a store of value, and in a pinch, you can trade them for goods and services. If you’re looking to protect your wealth from decades of inflation and diversify your portfolio, any precious metal holdings will help, but you should buy gold, palladium, or platinum if you can afford it.

Buy from a Reputable Dealer

If you’re going to buy physical gold, silver, platinum, or palladium, you want to buy it from a reputable dealer who will sell you gold and other precious metals at close to market price. Check the spot price of gold (or silver, or palladium, or platinum) before you buy any so you know you’re getting a fair deal. Expect a markup of one to five percent over the spot price. To check if the dealer is reputable, you can check their Better Business Bureau rating or, if you’re buying coins, the U.S. mint’s database of coin dealers. If you know you’ll want to sell your bullion, buy from a dealer with a buyback policy. That way, selling your gold, silver, or other precious metals will be easy and straightforward.

Invest in Funds or Stocks

If you’re going to buy physical precious metals, you’re going to need to store them securely, and that’s going to cost money. If you store your metals at home, you’re going to need a safe and a rider on your home insurance policy. If you store your precious metals in a safe deposit box, you’ll need to pay a yearly fee. If you store your metals in a depository, you’ll need to pay storage fees and, when you sell, possible shipping fees. 

If liquidity is important to you, but you still want precious metals exposure to diversify your portfolio, you can choose gold mutual funds or gold exchange-traded funds (ETFs). Precious metals mutual funds may hold stores of the metal themselves, or own stocks in mining and streaming companies, or both. ETFs track the price of precious metals. You can even buy stock directly in mining and streaming companies yourself. Just make sure to do the same due diligence you would when buying shares of any stock or fund.

Precious metals can be a strong investment vehicle to help you hold onto your wealth and even grow your wealth over time. Whether you buy physical metal or choose to buy shares of common stock or funds, you won’t regret adding precious metals to your investment holdings.

 

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