What are the Different Types of Precious Metals Investment?

Jim B.
Jim B.
Stack of gold bars.
Stack of gold bars.

Precious metals investment is often undertaken by individuals looking to invest their money safely in tough economic times. This is because precious metals like gold, silver, and platinum often retain their value even while other sectors of the market are struggling. Besides individuals collecting tangible quantities of these metals to hold and keep in hopes that they appreciate in value, precious metals investment may also take the form of investors buying stock in mining companies. Mutual funds devoted to precious metals or precious metals futures trading are two other means of this type of investment.

At times when the stock market or other indicators of economic strength show turbulence, the precious metals market often stands strong in the midst of that tumult. For that reason, investors often fall back on gold, silver, and the like during uncertain times in the market. Precious metals investment may take the simplest form of someone actually buying quantities of a specific precious metal and holding on to those quantities in hopes that their value may appreciate.

Other investors more familiar with the machinations of the stock market may wish to buy stock in companies that deal in precious metals. In terms of stock, precious metals investment usually flows to mining companies. It makes sense that a rise in demand for gold or silver would be a boon to those companies that mine those metals. Investors may wish to concentrate investments solely in the precious metals sectors when choosing stocks.

Those looking for diversity in their precious metals investment portfolio may wish to consider mutual funds. A mutual fund pools investments from multiple individuals who then share in the profits and losses in the fund, which invests in multiple securities. In this way, an investor in a precious metals mutual fund gets a professionally managed investment that spreads its capital across many different opportunities. Risk on the investor is lessened because a fund can stay strong even if one or more of the securities within it struggle.

One method of precious metals investment that an expert investor might attempt is the precious metals futures market. Futures are contracts entered into by investors that give them the opportunity to buy or sell securities at some point in the future. The idea behind futures trading in the precious metals market is that the investor ideally anticipates the price movement of the metals and takes advantage of the futures contract once the price moves in the predicted direction. As futures trading relies on speculation, it is extremely risky, but it also holds the potential for huge profits.

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    • Stack of gold bars.
      Stack of gold bars.