How to Invest in Precious Metals

In times of crisis, investors actively buy precious metals because these instruments are backed by a specific commodity. The likelihood that the value of precious metals will approach zero is small, so the risk of losing all the money invested is also small. For more information you may contact Pacific Precious Metals.

The most popular precious metals are gold, silver, palladium and platinum. They are divided into 2 groups:

Traditionally, gold is regarded as a value-preserving asset: in most cases, people invest in this metal to preserve rather than to multiply their money. Gold bullion can be stored for centuries without rusting, so its value is not lost over time.

Gold is bought not only by private investors, but also by the reserves of the world's banks. They replenish gold reserves to withstand the crisis when the prices of other investment instruments will fall.

Palladium is being bought by the automobile industry and used to make devices that clean exhaust gases. The public is becoming increasingly demanding of "environmentally friendly" cars, so automakers are increasing the amount of the metal in cars - which means demand for palladium will grow. Analysts predict a deficit of palladium on the market until 2024.

Platinum, like palladium, is also used in the automotive industry. In other industries, platinum is used in certain stages of refining and in the production of nitrogen fertilisers. Unlike palladium, platinum is a full platinum precious metal and is used in jewellery.

Silver. As an industrial material silver is used in electronics, chemistry, medicine and the military industry. It is also used to make jewellery.

Diversify your portfolio. Invest 10-15% in precious metals - and this will be the protective portion of your portfolio.

It makes no sense to increase the proportion because gold and other metals are an asset that generates no cash flow, unlike stocks or bonds. You can use it to temporarily protect your money from inflation, or to wait out market volatility, but not to generate income.

An increased demand for gold arises when risk-free rates (for example for US government bonds) begin to fall below expected inflation.

When trading industrial precious metals, pay attention to the balance of demand from consumers and supply from producers. Assess the surplus/deficit in the market and analyse the size of available stocks. For example, palladium shortages in 2019 on the back of the development of the electric vehicle industry led to a sharp rise in quotations.

In a 100-year history, precious metals have outperformed inflation but the fluctuations over the course of a day are quite high. Therefore it is worth investing in precious metals for the long term, i.e. 10-15 years.