Investing in Precious Metals
Why do People Invest in Precious Metals?
There are so many ways to invest your hard-earned money, and so many banks or brokers offering regular returns on your initial investment. In a world that is dominated by a desire to accumulate more, where new technologies and practices are revered, it could be easy to succumb to the idea that gold is a barbarous relic with little value as an investment. Bank and hedge fund managers will argue that the most sensible way to invest is in stocks and bonds that can offer a regular income. However, this precious metal continues to defy such logic, attracting investment across the globe and remaining a valuable commodity despite the existence of more modern, higher yielding assets.
Gold is well known and loved by many for its ability to hold its value. As a metal that has fascinated civilisations worldwide throughout history for its rarity and its beauty, gold has always been an expensive, but relatively steady investment. Some relatively isolated periods aside, wild fluctuations in the price of gold are few and far between, making gold a sound investment for those looking to secure their wealth for the future.
Besides its obvious beauty and prestige, its main attraction is therefore the fact that it protects your investment portfolio from inflation. Its value remains high while other assets fluctuate, making it an especially popular investment amongst those who are looking to ensure the long term security of a part of their wealth. Furthermore, this also makes it a very popular investment in times of economic turbulence; when confidence in the banks and other investments is low, precious metals like gold, silver and platinum become attractive alternative assets due to their reputation as being a ‘safe havens’. Throughout time, precious metals have repeatedly demonstrated the ability to survive, during periods of deflation and other adverse circumstances. When recession and enormous debt engulf the economy, demand for safe-haven assets increases massively, which in turn affects the price.
The period between 2008 and 2011 provides an excellent example of the properties that give precious metals their reputation as ‘safe haven’ assets. When the world was facing economic crisis and a sense of fear took over, the gold price experienced an enormous increase, soaring from around £450 per ounce to over £1,100 per ounce. Although the price has since come back down somewhat since its 2011 peak, it is still trading at almost £900 an ounce at the time of writing, around twice as much as it was before the recent global economic crisis. Since the 1970s, the price of the precious metal has increased by around 5,000%. Silver has followed a similar pattern over time increasing by almost four times during the global recession and has increased almost 1500% since the 1970s. Not only does this show their ability to remain valuable commodities, but also how the value of money is prone to change while precious metals retain their intrinsic value.
Nowadays there are several ways in which you can invest in precious metals. For centuries investors have been buying physical gold, silver and platinum, but there are in fact other methods such as ETFs. They both have their pros and cons, but we believe that buying physical bullion is a much safer way of investing in precious metals, especially if your main reason to purchase gold is for its usefulness as a secure, long term investment. Buying ‘allocated’ physical gold allows you the privilege of owning and possessing a specific amount of gold. Having this gold delivered to your house leaves your investment in your hands, meaning that you are able to rest assured that the safety of your money is not dependent on a bank or businesses’ performance or stability, thus fulfilling the precise reason you may have chosen to invest in a physical commodity with an intrinsic value, rather than put your money into a bank or invest in shares or other similar assets.
This intrinsic value makes precious metals an excellent long term investment. The fact that they have generally become more expensive throughout time reinforces their value as a reliable and secure store of wealth. While paper currencies continuously lose value as more cash is printed all the time, gold, silver, and platinum remain rare. It is possible to argue that precious metals are still the ultimate representation of wealth, despite the international use of unbacked paper currencies, and it is no coincidence that many banks and governments across the world still aim to hold a significant percentage of their reserves in the form of gold bullion.