What Are Precious Metals and How To Invest in 2023

Kings, emperors, and noble families have always appreciated the beauty of the shiny yellow metal.

Nowadays, investors still hold precious metals in high regard.

Whether buying physical assets or partnering with a precious metals IRA company, you can get a return on your investment in various ways.

In this article, I’ll discuss the different types of precious metals available and the best investment strategies to consider.

What are Precious Metals?

Precious metals refer to rare metallic elements with high economic value.

Gold, silver, platinum, and palladium all fit into this category.

There are also lesser-known metals such as iridium, rhodium, ruthenium, osmium, and rhenium.

These represent a collection of rare and valuable metals that help maintain long-term stability and value over time.

How Can I Invest in Precious Metals?

One can add precious metals into their investment plan in many different ways.

One way to invest in precious physical metals is by purchasing physical pieces – gold or silver coins or bars – which one can buy through online dealers or local shops.

Those looking for a more hands-off approach may opt for mutual funds or ETFs that include exposure to these assets.

Additionally, investors can purchase stocks of companies that actively mine and manufacture these metals.

This strategy carries more risk than other methods due to its reliance on stock prices.

However, it also has the potential for higher returns if done right.

What Should Investors Consider?

Due to their higher prices, it is essential to consider the costs and fees associated with investing in physical precious metals.

Since mining companies extract and refine the metals from naturally occurring deposits, investing in precious metals comes with certain risks.

For example, global economic conditions can affect the supply and demand of these metals.

A case in point would be platinum and palladium, which are rarer than gold and silver, leading to prices that can be more volatile.

No matter what type of noble metal investment you choose, it’s also crucial to consider the associated fees.

These fees include the spreads (the difference between buy/sell prices) or commission costs (paid when buying/selling).

It would help if you always researched before investing in any asset – especially when it comes to something as volatile as precious metals.

Ensure you understand the risks and that your approach fits into your financial strategy.

The Benefits of Investing in Precious Metals

Precious metals offer several key benefits to investors who choose them as part of their portfolio diversification strategies.

Here are just a few:

• Portfolio diversification – Adding precious metals to your portfolio provides global diversification, helping to reduce risk and increase returns during periods of market downturns or economic uncertainty.
• Low correlation with other asset classes – Precious metals have a low correlation with other asset classes, such as stocks or bonds. They can act as a hedge against market volatility and provide stability when other investments may be struggling.
• Inflation protection – Inflation is always an issue when investing in traditional assets like stocks or bonds. However, because gold prices often increase during periods of inflation due to its limited supply and high demand, gold is seen as an effective way to protect against inflationary pressures.

Types Of Precious Metals To Invest In

Let’s now look at the different types of precious metals investors can choose.

Gold

Investors have used gold to symbolize wealth and success for centuries.

Whether creators use gold in jewelry, coins, or art, this metal has remained valuable throughout history.

In addition to its classic yellow hue, one can find gold in many other colors and forms.

Fine gold is the purest form of gold available.

There are various possibilities with a fineness of 999 (which means it contains at least 99.9% pure gold by weight) to gold alloyed with other elements for unique colors.

Fine gold is generally too soft for jewelry making, so it must be alloyed with other metals, such as silver or copper, to increase its strength and durability.

The amount of fine gold in an alloy will determine its color.

Adding more silver will make the metal appear whiter, while adding more copper will create a reddish hue known as rose gold.

One can also find yellow gold mixed with silver for a warm golden hue rose tinted from copper.

There are also cool white tones complemented by either Palladium or nickel-gold, which are fantastic metals that can add elegance to any collection.

Silver

Silver has numerous industrial applications, and investors see it more as a speculative investment than its yellow precious metal counterpart.

This distinction is usually due to its lower prices per ounce.

Silver carries more risk than gold (its price can be two to three times as volatile as gold) but also offers potentially higher returns for those willing to accept this additional risk.

Like gold, the right individuals can liquidate silver quickly, making it ideal for those needing quick access to capital in times of need.

Platinum

Platinum is a rare metal that miners only find in a few countries worldwide.

Its value is heavily influenced by supply and demand, making it an unpredictable yet potentially lucrative asset to invest in.

In addition to being sought after by individual buyers due to financial speculation potential, platinum is also utilized extensively in numerous industries.

These industries include automotive manufacturing, textile production, aerospace engineering, and medical technology development.

As such, its value can fluctuate drastically depending on the current needs of these industries.

The main advantage of investing in platinum compared to other precious metals such as gold or silver lies in its rarity and volatility.

Investors willing to take on higher risks will likely find greater rewards with platinum investments than those who opt for more traditional options.

Additionally, since the demand for platinum is constantly changing due to its many industrial usages, investors have more opportunities to make profitable trades when prices increase or decrease rapidly within short periods.

Unlike gold or silver, one can invest in platinum without physically owning any metal.

Your investment portfolio can remain liquid while still taking advantage of market fluctuations.

Investing in platinum is relatively straightforward.

You can buy physical bullion (coins or bars) from dealers or online retailers and store them securely until you decide to sell them later.

Alternatively, you can purchase exchange-traded funds (ETFs), which track the metal’s price movement without storing any physical assets yourself.

Finally, some brokers offer contracts for difference (CFDs), which allow you to trade on margin and speculate on future price movements of the metal without owning any of it yourself.

Palladium

Palladium is a rare and valuable metal that stands out among other precious metals due to its unique properties.

During times of economic crisis, the price of palladium is more unpredictable than that of stable commodities like gold or silver.

With industrial demands only climbing higher, it appears that Palladium is well-suited to become an increasingly sought-after commodity.

It is a “catalyst” metal that can speed up chemical reactions without being consumed.

The demand for palladium has been steadily increasing over the last few decades as new technologies emerged that require this rare metal in their production processes.

This fact makes palladium extremely useful in many industries similar to platinum, including medicine production, the automotive sector, jewelry crafting, and more.

The automotive industry is one major consumer of palladium due to its use in catalytic converters (devices used to reduce pollutants from car exhausts).

Recent developments in electric vehicles have also caused a surge in demand for palladium.

These cars require more significant amounts of palladium-based parts than traditional gasoline or diesel engines.

Additionally, electronic devices’ industrial uses involve large quantities of palladium due to its ability to conduct electricity with low resistance while remaining stable at high temperatures.

All these properties make this metal ideal for producing circuits on computer chips and other electronic components.

Rhodium

Rhodium is a silver-white transition metal found in the platinum group of metals.

It is one of the rarest elements on Earth, and miners can find it in South African and Russian deposits.

Its rarity adds to its desirability and value, making it one of the most expensive metals on the market.

Rhodium also has some unique properties that make it ideal for specific applications, such as its ability to reflect light and resist corrosion.

These qualities make it particularly useful for jewelry makers, who often use rhodium plating to enhance their pieces with a brilliant shine.

In addition to its use by jewelers, rhodium has a wide range of industrial services due to its unique properties.

Rhodium can be used in medical imaging because it absorbs X-rays better than other metals.

This property allows doctors to get a clearer view of the body during diagnostic procedures such as CT or MRI scans.

While rhodium may not be as well known as gold or platinum, it certainly punches above its weight regarding value and demand.

With its hefty price tag of $12,350.00 per ounce in January 2023, rhodium is one of the most sought-after precious metals.

A Note On Alloys

Alloys combine base metals to produce a more robust material than any one substance could achieve.

For example, one can create gold alloys by mixing one or more metals.

These include the combination of silver, copper, nickel, iridium, Palladium, zinc, aluminum, lead, and iron, into fine gold to add strength and create different colors and finishes.

Each combination creates unique characteristics in the final product, making it appealing to artisans seeking special effects or those developing pieces with specific properties.

For those looking for metals with strength or malleability, the most popular types of alloys are:

• Yellow gold (fine gold + silver + copper).
• White gold (fine gold + palladium + nickel).
• Green gold (fine gold +silver+copper+zinc).
• Rose-gold (fine gold+copper).

Combining precious metals found in Earth’s crust with base metal is not new.

It continues to be used today in jewelry making, coins, electronics, and many other manufacturing and industrial processes.

What Factors Determine the Cost of Precious Metals?

Here are the top factors that determine the cost of precious metals.

Spot Price

The spot price of an item is its market value at that moment.

Spot prices depend on the current supply and demand for those items.

They can fluctuate daily or even hourly due to economic conditions and other factors.

Premium

The premium covers all manufacturing costs and a reseller’s fee.

Precious metals tend to incur fees the seller has had to pay when obtaining or creating the item.

There are also additional costs associated with shipping, handling, or storage fees.

It also includes any markups the reseller added to profit from selling the item.

Taxes & Duties

Another factor to consider is taxes and duties in your country or jurisdiction.

These can vary from country to country, so it’s essential to be aware of them before buying any precious metal.

In some countries, there are no taxes or duties on gold purchases.

However, there can involve double-digit percentages in extra costs in others.

Knowing these costs beforehand can help you plan for your purchase better.

Storage Options

Another critical factor is where you will store your precious metals if/when you buy them.

Depending on the size of your purchase, storing them at home can pose safety risks.

If they are stolen from your house or apartment, your insurance might not cover your loss.

Alternatively, your insurance costs might get higher over time.

Many experts recommend using a bank-safe deposit box or a secure storage facility that safeguards valuable items.

Reselling Difficulties

It’s essential to consider potential difficulties when reselling precious metals later.

Finding buyers willing to pay market prices for the products you wish to sell is always ideal; however, it might not always be the case.

Knowing the supply/demand situation for any precious metal is ideal.

Mining Or Refining Processes

Precious metals are mined from the Earth or refined from existing commodity supplies and have long been an essential part of commodity markets.

Being rare elements, they all have a high melting point and require specific refining processes.

Gold, for example, must be heated from other metals and materials found in the ore.

A purification process follows the melting process to create gold of the highest purity.

Precious metals have various refining processes to create jewelry, coins, and other products.

These processes include electro-refining, solvent extraction, and chemical refining, which involve various chemical and physical procedures to produce the desired results.

All of this also affects the price of specific metals.

Current Demand for Precious Metals

Precious metals such as gold and silver have been sought-after assets to store wealth for centuries.

From its most valuable inflation-adjusted price in 1980 to its low points by 2001, the last two decades have seen an exponential rise in demand for these precious metals.

Gold prices have nearly doubled since 2000.

Such prices have increased from around $250 an ounce to more than $1,700 (as of the time of writing).

The surge in gold’s popularity is driven by the mistrust of traditional investments and volatile global politics, making digital assets a more attractive option.

With gold being a traditional safe haven asset, investors are turning to it to preserve their wealth during market volatility.

Silver prices have also drastically increased in the past two decades.

In addition to economic uncertainty and geopolitical tensions driving demand for these precious metals, several other factors are also at play.

For example, many investors view them as “hard” assets.

They are finite resources that cannot be created or destroyed, making them attractive investments due to their scarcity value.

Additionally, increased technological innovations have made it easier for individuals to buy precious metals.

On the other end of the spectrum, sellers find it easier to sell metals online without having to store them somewhere physically.

All these factors have made it easier for individuals looking to add precious metal investments into their portfolio mix.

Using Futures To Your Advantage

Futures refer to contracts that specify the future delivery of a specific commodity at an agreed price.

While one can buy the three most popular precious metals – gold, silver, and platinum – outright, futures contracts can also speculate on their price movements without purchasing them.

Using futures contracts allows investors to gain exposure to the metal markets while leveraging their investment capital to increase their potential return on investment.

For example, one could purchase a gold futures contract with the expectation that the gold price will rise over the next few months.

They would then sell it when the price increases, pocketing any gains from the trade.

As a concept that’s also used in real estate to speculate on the future prices of homes, investors who understand how to use futures can benefit from their investments.

All of this can happen without needing to purchase any physical assets.

What Are Precious Metals? FAQ

What Are The Advantages Of Investing In Precious Metals?

Precious metals have been used to hedge against inflation and currency devaluation.

These materials provide investors with a tangible store of value.

Since precious metals are elements commonly used in modern electronics due to their conductivity, they have the potential to appreciate as global demand increases.

Why Should One Invest In Gold Bullion Instead Of Other Forms Of Investments?

Gold bullion is often used for investment purposes in the form of gold bullion bars and coins.

Gold also acts as a hedge against inflation since its price typically rises when the cost of living increases.

Investing in gold bullion is one of the ways to invest in gold that is simple, safe and secure.

How Can Precious Metals Be Used To Produce Coins, Jewelry, And Other Items?

Popular precious metal is used to produce coins, jewelry, ingots, tokens, and other items.

Coinage is the practice of minting (generally) gold or silver coins from precious metals.

One can use cash for commerce or numismatic purposes (collecting).

The coins are usually stamped with a design that is both decorative and serves to indicate their value.

Jewelry is another use of precious metals.

Jewelers often create intricate designs using gold, silver, and platinum for rings, bracelets, necklaces, earrings, and other forms of jewelry.

Platinum is often used in wedding bands because it is hypoallergenic and durable.

Ingots are ingot bars or coins cast from precious metals such as gold, silver, copper, and platinum.

One can use ingots to store wealth or be melted down and reused.

Finally, tokens are pieces of metal with specific designs that indicate the value of the work.

Tokens are made from brass, bronze, aluminum, or other metals.

One can use them as a medium of exchange in specific markets.

What Is Osmium?

Osmium is a chemical element with the symbol Os and atomic number 76.

It is a complex, brittle transition metal in the platinum family and is the densest naturally occurring element.

Osmium is used mainly in alloys with other metals to improve their properties, such as strength and resistance to corrosion.

Wrap Up.

Economic uncertainty, geopolitical tensions, and increased technological innovations have primarily driven demand for precious metals.

All this makes buying and selling these items online and offline easier.

It is critical to do your due diligence and research if you’re considering investing in precious metals.

Knowing the costs, risks, and potential difficulties with resale are essential in helping you make an informed decision about your purchase.

That said, the return on investment could be huge if you get it right!

Your portfolio can gain significant returns on precious metal investments with suitable investments.

What do you think about precious metals?

Have you invested in any of them?

Let me know in the comments below.

Further reading on AdamEnfroy.com: Gold IRA companies provide a service to buy and store gold on behalf of customers in an IRA account.

If you want to secure your retirement financial future, you should consider this method of investing.

You can also do a gold IRA rollover to transfer your existing retirement accounts into a gold-backed IRA.