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How to Invest in Precious Metals


Investing in precious metals can help an investor diversify their portfolio. A healthy mix of stocks, bonds, mutual funds, or even an exchange-traded fund (ETF) or two can keep your portfolio balanced. However, there’s a lot of potential for investors who want to bet on the price fluctuations of gold and other precious metals. A financial advisor can also help you invest in precious metals or just about any other investment opportunity.

Buying Physical Quantities of Precious Metals

There are several ways to invest in precious metals. First, you can buy physical quantities. Gold, silver, and platinum are typically available in bars or coins from a reputable seller or coin dealer.

Let’s start with gold. You can purchase gold in a variety of sizes, from just a gram to several ounces. Gold is available in coin or bar form. It’s also considered a good investment because its value doesn’t fluctuate as much as other commodities and isn’t as susceptible to inflation. Gold can be a steady investment in uncertain times, such as war or an extreme economic downturn.

Silver bars and coins are another way to invest in precious metals. Their price fluctuates more than gold, making silver a volatile and riskier investment. That’s because its value hinges on both its worth as a precious metal and its worth as an industrial metal.

Platinum is another option for investing in precious metals. Sold by the gram, kilogram, or ounce, platinum is much rarer than the two aforementioned metals. It’s also lesser-known and holds higher value. Palladium tends to trade along similar lines.

If you choose to purchase bars or coins of precious metal, be sure to purchase them from a reputable dealer. Be wary of extremely over- or underpriced commodities, as they may indicate a scam.

Investing in Precious Metals Through the Stock Market 

Here's how to start investing in precious metals.

But you don’t have to stock up on gold bars to invest in precious metals. You can also invest in precious metals via the stock market. There are a few options here.

First, you can do so via futures contracts and options, both of which are derivatives. Futures contracts, often used when trading commodities, are when the buyer agrees to buy a set amount of an asset (i.e. a stock or commodity) at a set price within a set time frame. Options, on the other hand, give the buyer the option to buy a certain amount for a set price within a time frame but doesn’t require it.

Exchange-traded funds (ETFs) are another option for investing in precious metals. As with any type of ETF, investing in the precious metal ETF space allows you to build a diversified portfolio with minimal risk.

You can also own precious metals in an individual retirement account (IRA). A gold IRA holds gold coins, bullion, or bars in an account. You can also hold silver, platinum and palladium in your gold IRA. When it comes to IRA contributions, disbursements and taxes, gold IRAs are much the same as other IRAs.

More tangentially, you can also invest in mining equities. This means investing in companies that mine gold, silver, and other precious metals. This investment option is a bit riskier, since it also depends on a lot of external factors. The health of the company may be as important to your portfolio as the value of the precious metals mined.

Investing in Precious Metals: Pros and Cons

Investing in precious metals provides a safe haven from currency fluctuations. If there’s a major political event or economic collapse that affects currency, precious metals can act as a hedge against inflation. The value of precious metals tends to increase when currency collapses, which can offset losses if you keep metals in your portfolio. Another major positive mark for precious metals? They are more likely to retain their value over time.

The downside is that you’re still investing in a commodity. Much like investing in oil,  price is subject more to supply and demand than the health of a company. An investment in gold also won’t earn you dividends while you own it. You can only turn a profit once you sell it.

Bottom Line 

Here's how to start investing in precious metals.

Investing in precious metals could be a good way to diversify your portfolio. You can buy physical quantities of gold, silver, or palladium, or invest in them through stock market via futures and options or ETFs.

Investing in precious metals can also be a sort of insurance policy for your portfolio since precious metals tend to retain their value. However, investing in these commodities is not without risk. As such, if you choose this investment strategy, you may not want to over-invest.

Investing Tips

  • Wondering how precious metals might fit in your portfolio? You may want to ask a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you don’t know what to invest in or what your risk tolerance is, you aren’t alone. SmartAsset’s investing calculator can help you figure out how much you may want to invest, how much risk you’re willing to take on, and how much inflation and capital gains taxes will affect your decision.

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