The What Why Where and How of Investing in the Precious Metals Market

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Increasingly, the secret is out about the unique advantages of investing in the precious metals market. Those new to the game, however, face numerous questions in understanding and safely and profitably being involved in the area. Let’s take a quick look at each aspect of the puzzle.

What Are Precious Metals?
Precious metals include gold and silver as well as the less commonly considered platinum and silver. Each has unique properties and investment considerations.

As the precious metal with the greatest visibility and mind share, gold is a beautiful yellow substance used most commonly in jewelry but also in some industrial and medical applications due to its non-corrosive properties. The price of gold is not closely tied to supply and demand and while fluctuating, is relatively stable. This is true because the supply greatly outstrips demand. Thus, gold is relatively stable in price.

Gold is considered a safe-harbor when investing in the precious metals market when money and banks are considered unreliable.

Silver is used in jewelry and other aesthetic applications, but also has more industrial uses than gold because of the effects of supply and demand. The phase-out of photographic developing sharply decreased demand; however, the rising demand for appliances and electronic equipment continues to increase as more and more nations grow their middle-class consumer communities. Silver has the unique advantage among the precious metals that it increases in value in both inflationary and deflationary environments for those investing in the precious metals market.

Platinum is much more rare than gold and trades in global markets. Highly subject to supply and demand, whether from national policy manipulations or labor strikes, platinum prices are more variable than with gold and silver.

Palladium has far less public mindshare than the other main precious metals. About half of the demand for palladium arises from production of catalytic converters. These converters are vital to environmental protection. Thus, it is reasonable to expect continued growth in the market for palladium for those investing in the precious metals market.

Why Invest in Precious Metals?
Unlike a company whose stock can become near worthless overnight, precious metals are tangible, durable matter that backs up the paper through which they are commonly traded. Additionally, the total sum of global supplies does not vary even though mining production output can vary. That is, with each use of such a metal, unless reclaimed in the future the total available worldwide supply effectively diminishes.

Where and How Does One Go About Investing in the Precious Metals Market?
You can own precious metals through stock market shares or mutual funds. The vehicle is exchange-traded funds (ETFs). There are also markets for in certificates and futures. Futures involve greater risks because of the way they are traded and liquidated.

Another option with advantages is to directly purchase and physically possess bars or coins. Here, you are more assured of what you really own than if you simply bought paper. In addition, you are insulated from the divergence of the value of the metal itself and the value of the associated paper. The downsides of physical ownership include associated sales taxes, physical storage and security, and insurance.

It should be noted that platinum is traded only on the London Stock Exchange.

Explore this New World of Investing in the Precious Metals Market

Staying abreast of precious metals as an investment is an adventure and education in current world events. Overall, it is important that investors either keep a close eye on the factors affecting their portfolio, or remain invested for greatly extended periods of time.

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