Today’s tumultuous times call for some additional measures for diversifying and protecting your portfolio. Precious metals can be the ultimate hedge against inflation and uncertain times. Historically, precious metals have been used as inflation hedges and portfolio diversification tools—especially for long-term investments. Silver, gold, platinum, and palladium are all popular options. Whether physical versions of these metals or stocks, ETFs, and futures there’s considerable value in precious metal investing. With the price index hitting a nearly 40-year high, purchasing power is decreasing and interest in precious metals is growing. Here’s a quick breakdown of each as you consider altering the course of your investment strategy this year.
Why Choose Precious Metals?
In the wide world of investing, the market can often be unpredictable. Economic uncertainty leads to significant pain points for many industries. And the fallout from those pain points can negatively affect stocks. During times like this, investors like to turn to precious metals as a sort of salve to help attenuate some of the deleterious consequences of outside events impacting their businesses. Although it is true that there might be more buyers than sellers of precious metals on occasion, precious metals tend to rise sharply during poor economic times. So investing in precious metals can be a good way to guard yourself against inflation or probably price fluctuations as the market becomes more volatile.
The first precious metal on our list is perhaps the most versatile. Used widely in a range of industrial and consumer applications, silver is one precious metal that has a high degree of intrinsic value. There’s tremendous demand for it and its supply is limited. It’s a little bit more volatile than gold, by about 1.5 times. This is largely because it has both investment and industrial applications. Of course, silver works well as an inflation hedge at times because it can help increase purchasing power when the dollar weakens. It’s popular with investors in physical form (bars, bullion, coins, and junk jewelry) as well as exchange traded funds and silver futures. A great way to get started with silver (or continue an existing investment) is to snag a few high quality 5 oz silver bars from a reputable mint.
Palladium is one of the most distinctive, unique precious metals in the world. Palladium is used throughout multiple industries and in some types of jewelry. Palladium has grown consistently in recent years, largely due to changes in emissions regulations. Despite these changes, demand for palladium is still quite high. As a trading commodity, palladium is mostly used for diversification and an inflation hedge. The only real downside here is the size of the palladium market. Only a few companies worldwide deal with palladium at all, so the investment pool is a bit shallow. Physical palladium ETFs are available, but they are tough to access. That said, palladium is trending high but is also pretty scarce, so depending on your interests it could be the right metal for your next investment.
Investing in platinum doesn’t always register very high on most investor’s radar. It hasn’t performed as well as other precious metals over the past few years. But right now, it’s less costly than gold and offers many of the same portfolio benefits as other precious metals. Platinum is used mostly in vehicles. Most of its supply is centralized and it is a rare metal, but not in short supply. Although prices are starting to rise a little bit, it still isn’t in very high demand. But that is poised to change as demand for more catalytic converters of vehicles starts to rise. In response to that, exchange traded funds and physical Platinum are starting to take off. That makes it a good bet for some diversification with other precious metals, especially because one day it will very likely start rising considerably again.
When you picture gold in your mind, you might often imagine piles of intricate jewelry, fine watches, barrels of coins, or even elegant bars of pure gold. For centuries gold has always been one of the most valuable, sought-after metals in human history. It’s rare. It’s scarce. Finding it and mining for it is not a simple task. At one time, it backed the U.S. dollar, but that isn’t the case anymore. Still, it retains its value today and is now considered to be a fine investment opportunity, especially during tumultuous times. The most significant reason to invest and hold gold is probably its ability to hedge against inflation and remain valuable during deflation events. Since it protects purchasing power over time, it is a pretty wise investment to use as both an inflation hedge and to diversify your portfolio. There are several ways to get into gold. There are gold bars, coins, and bullion for physical investments. For something that gives you the gold investment but doesn’t require physical storage, gold options, a gold exchange traded fund, or mining future are also viable options for jumping on the gold investing bandwagon.