In this technologically advanced and virtually interconnected world, do precious metals still have a place in the world? Everything is digital. Even money is being wired digitally across the world. But how can you wire a bar of gold or a coin?
Precious metals are rare. Because they can be difficult to acquire, they have a high monetary value. Gold, platinum, and silver are popular precious metals among investors, with gold being the most popular.
Many will say that precious metals do not have the same value that it did in the past. After all, monies are being exchanged through the Internet. Will investing in pure gold jewelry and high-quality gold bars from gold refinery companies be a smart financial move?
If you want to grow and diversify your investment portfolio, you can invest in precious metals. But first, here are some facts about precious metals that you should know about.
How Gold Was Used in the Past
Gold has been around for a while. The long history of gold started in 2000 BC, way back when the ancient Egyptians used them as accessories. However, it was around 500 years before Christ came that gold was used as a currency. Gold coins were created so that merchants could trade easily and conveniently. As centuries passed, gold became a symbol of wealth and social status.
In 1792, the US government established a bimetallic standard. This means that every monetary value released by the government should be backed by silver or gold. Monies represented the precious metals that were deposited in banks.
However, with the creation of the Federal Reserve in the 1900s, gold was slowly phased out of the system. The US government gained the title to all gold coins through the Gold Reserve Act of 1934. In 1971, the government stopped backing its currency with gold.
While gold no longer backs any currencies in the world, it is still important to the economy. Gold is still one of the most popular commodities among investors. One of the reasons is that its value increases over time. It preserves the value of your investment.
What Makes Precious Metals a Good Investment
Investors add gold to their portfolio for many reasons. Here are some of them.
- Gold is more stable than the financial system. While banks and the financial system are affected by the political environment and climate of a country, the value of precious metals is often unaffected by these instabilities.
- Gold can be used in times of crisis. You can make your savings portable and store them safely by exchanging them for gold.
- Gold can survive inflation. Inflation can lessen the value of your cash, but gold can retain and even improve its value. Even the stock market can crash catastrophically.
How to Invest in Precious Metals
If you are wondering what is the best way to invest in gold, here are your choices.
1. Buy bars and coins.
When you buy gold bars and coins, you own the gold. You own it without the need to pay fees when you want to exchange it for cash for emergencies. It is also stored outside the system, so you are not dependent on any financial institutions to maintain its value.
When buying gold, choose to buy only from reputable and trusted sellers. Some dealers are out there to take advantage of the ignorance of buyers. Buying from gold refinery companies may be more expensive compared with independent dealers, but you can have the assurance that you are buying only the real deal.
You can choose between gold and silver. Gold has a higher demand and has a bigger market. You can easily sell off gold when the need arises. The price of gold is also more stable compared with silver.
Silver, on the other hand, is more affected by the economy. This is because silver is used in many industries. It is also cheaper to buy compared to gold.
2. Invest in gold exchange-traded funds.
If you want convenience in your investment, then investing through ETFs is the right choice for you. However, investing in ETFs does not mean you own any gold. You cannot use the gold in the fund in times of financial emergencies.
For many, buying precious metals is the better option. You own the gold, and it is at your disposal.
Should You Buy Bars or Coins?
Most investors prefer to invest in bullion coins. They are easier to sell, especially the popular sovereign coins. Coins also tend to sell at higher premiums. When buying coins, stick with the popularly known coins instead of commemorative coins which are more expensive.
Buyers who buy gold in bulk choose to buy in bullion bars because of their lower premiums compared to coins.
You can move forward to a more financially secure future by diversifying your investments. Diversifying your portfolio gives you protection from the uncertainties of the economy.