Getting involved in precious metals investing can happen in a variety of ways. However, many investors are recognizing that purchasing bullion bars and coins offers the best direct exposure to enhance their portfolio. Owning the tangible assets of gold, palladium, platinum and silver makes precious metals investing an easy process that provides stored value for the future.
The top four leading precious metals including gold, palladium, platinum and silver are often purchased as a way to hedge against the potential of investment losses. Over the last decade, the prices of these precious metals have stabilized showing active growth in nearly every year.
Precious metal investing acts as a proven hedge in providing protection to existing wealth. It safeguards against any potential of loss in other asset classes that include bonds, equities and real estate. Many investors specifically purchase gold or silver as a protection against inflation. Experts agree that these positions are still worth holding even though the past worries about inflation are more of a result of fear than reality.
Fear of Inflation
However, that fear of inflation in the last few years is not unwarranted. US monetary and fiscal policies, blended with the actions of the Federal Reserve maintaining low interest rates (at nearly 0%), have made precious metals investing extremely attractive. This is especially true when an individual is heavily invested in other trading instruments that cannot actively keep up with the rate of inflation when measured by CPI (consumer price index).
Historically, any time a government has offered near zero interest rates and begins deficit spending without the necessary fiscal cuts, the price of precious metals has risen. Because of that, many investors are choosing precious metals investing to drive away the fear of the unthinkable and the unknown. For these investors, the continuation of the weakening US dollar results in the unknown. The unthinkable is often realized when investors are not sure of the stability of major country economies and how they will handle their financial crises that are near catastrophic.
It is these two actions that have accelerated the investor’s fear. As a result, they have turned to precious metals investing because it appears to be a proven hedge against the unthinkable and the unknown.
There has been a significant demand for both gold and jewelry worldwide. Emerging market countries including India and China are purchasing huge quantities of the precious metals for ornaments and jewelry. Nearly half of the world’s population has a strong belief in the value of precious metals, especially gold and silver.
The Demand for Precious Metals
In 2011, the purchases of precious metals in China and India accounted for over 50% of the entire demand for gold and silver coins, bars and jewelry worldwide. This put an increased demand on supply, which drove up their spot prices accordingly.
Research indicates that precious metals mines around the world are not increasing their production due to a variety of reasons. The creation of new mining has been stifled due to environmental regulations, and the increasing cost of finding new areas through exploration, extraction and the price of shipping. Many experts believe that it is far too challenging to get precious metals assets out of the earth.
Financial advisors recommend that anyone considering precious metals investing should diversify their portfolio. The amount of diversification should be up to 15% of their total assets in gold, palladium, platinum and silver.
Owning the physical assets offers an amazing opportunity for long-term investing. It takes the assets out of government regulations and provides the investor easy access to their bullion bars and coins that can be converted into currency or bartered for goods if necessary. Now appears to be the best time to get physical in precious metals investing.