What Are the Best Tips for Precious Metals Investing?

Alex Newth

Precious metals investing is an entirely different world from investing in stock and bonds. The precious metals investing world is highly volatile, especially for gold, and there are many factors that can destroy the investment, including poor manufacturing or low-quality bars and coins. That volatility leads many experts to suggest that precious metals should only make up a percentage of an investor’s portfolio. When obtaining precious metals, an investor should never purchase jewelry, which will have a price markup.

Stack of gold bars.
Stack of gold bars.

With precious metals investing, an investor has to choose what type of metals to invest in. An investor can choose a specific metal, such as silver, gold, or platinum, or can choose to invest in a range of metals. Each metal has a different value and different volatility.

Palladium is a precious metal that is generally worth more than gold.
Palladium is a precious metal that is generally worth more than gold.

The popularity of gold means this metal tends to be the most volatile and can either make an investor a large amount of money or lead to high losses. If the investor is not interested in such a volatile market, lower volatility metals such as silver or platinum could be a better investment choice. These metals tend to have steady gains or losses when compared to gold. Platinum and palladium are also generally worth more than gold.

Unlike stocks and bonds, in which the stock is worth whatever the affiliated business is worth, precious metals investing is concerned with the quality of the precious metals. Choosing a manufacturer that makes high-quality bars and coins is imperative to making money. Buyers, especially other investors, are wary of purchasing precious metals if the metal is warped or imperfect. The purity of the metal is also important, because lower purity metal is mixed with regular metal and lowers the value and price.

Precious metals investing deals with the items forged from the metal more than with the metal itself, which is why imperfections matter so much. The two most often invested in shapes are bars and coins. Coins, which are smaller, are lighter and are usually better for smaller investments. Bars, which can be as light as a coin but are usually made larger and heavier, are usually better for larger investments.

Most experts suggest that precious metals investing should only make up a small percentage of an investor’s investing portfolio. The common suggested range is from 10 percent to 15 percent. This is primarily the result of volatility, because precious metals investing can either balloon or implode at any moment.

It is best to obtain precious metals from markets that sell the metal at market price. Investing in jewelry to obtain precious metals is often a bad idea. This is because the cost of the work done to the metal to create the piece often pushes the price of the jewelry up far beyond the market value of the precious metals involved. While an investor can still make a profit, it will often be much less than if the investor purchased an equivalent amount of coins or bars.

Precious metals investors should never talk openly about investing in precious metals. Other people can overhear and may plot to steal the precious metals. Unlike stocks and bonds, precious metals theft cannot be easily traced, so the metals will usually not be recovered.

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