A few weeks ago, we published the first in a series of blog posts unpacking common reasons investors hesitate, hold off on, or altogether decide against incorporating gold, silver, or other precious metals into their portfolio-building strategies.
According to recent research, the most common reason people pump the breaks when it comes to precious metals investing is that they are reviewing an investment proposal they currently have in hand.
The second most common reason is that investors are in the initial research phase of their journeys. This rationale is more than respectable, and investors should indeed take the appropriate amount of time to learn about, explore, and compare investment strategies until they find the right fit for their needs.
We dive into this topic more below and provide what we hope will serve as a useful jumping-off point for anyone who also finds themselves in the beginning research phase of their investment journey.
Why Invest in Precious Metals?
Hedge Against Market Volatility
In an uncertain world, precious metals investing is an excellent way to maintain relative stability and hedge against losses from constantly fluctuating stocks, bonds, and other highly sensitive markets. Even in "good" times, it's essential to remain vigilant and establish an investment strategy that is equipped to weather economic storms and ultimately safeguard your hard-earned wealth in the long run.
That’s where precious metals come in! While the exact makeup of any investment portfolio should be shaped by and evolve alongside each investor's unique life circumstances, financial advisors generally recommend assigning 5% to 20% to precious metals. Adopting a Smart Asset Allocation Strategy allows you to add these non-correlated assets to your holding, which, in turn, can help protect your money from inflation, currency devaluations, and other forms of economic turbulence.
Investing in precious metals helps to shield you and your wealth from relying heavily (or solely, in some cases) on the promises, projections, and reputations of publicly traded corporations. By incorporating physical assets like precious metals into your investment holdings – whether you receive them directly to keep at home or store them in a secure, insured facility like the Texas Bullion Depository – you maintain a level of control that may otherwise be lost if your portfolio were made up solely of highly sensitive assets like stocks.
Precious Metals Possess Intrinsic Value
Investment-grade gold and other precious metals, as opposed to other commodities, fiat currencies, stocks, and bonds, maintain intrinsic value simply by way of their physical properties. Gold, for example, is permanent – you can melt it, reshape it, break it up into smaller pieces, expose it to the elements, and in the end, you still have gold. This ability to maintain physical integrity is one of the main reasons most, if not all, significant societies throughout history have adopted precious metals like gold to represent wealth and establish monetary systems.
Metal products also stand the test of time and are more enduring than fiat currencies. The longevity or even existence of the dollar, euro, pound, or other state-controlled currencies is not guaranteed. For example, take Germany, which has endured at least four currency transitions in the last 100 years alone. Monetary turnovers are extreme events for nations that often subject populations and global markets to uncomfortable periods of adjustment, drawn-out economic disruptions, and, in some cases, even personal destitution.
Add Precious Metals to Your Retirement Savings Plans
Precious metals can also be incorporated into retirement accounts like IRAs and 401Ks to help protect investors and their retirement nest eggs for years.
Typically, most Americans become less and less risk-tolerant the closer they move to retirement. During peak earning years, most workers embark on aggressive investment strategies tied closely to stocks and other volatile assets. As those workers grow closer and closer to retirement age, they become more drawn to conservative investment strategies that minimize risk while still maximizing returns.
Precious metals fit this bill perfectly! But you don’t have to wait until you’re close to retirement to capitalize on this way of investing.
Thanks to a little-known U.S. law, investors can incorporate gold or silver coins and bars into their retirement savings at any point in their lives via a self-directed IRA account. Many Americans establish retirement accounts at the start of their careers, relying heavily on stocks, bonds, and other volatile assets. These initial portfolios are often left untouched for decades, growing more and more ineffective with each passing year. If left unchecked and with a sustained heavy reliance on volatile markets, those Americans, as they near retirement age, could lose everything in the event of an economic downturn and have very little if any, time to recuperate.
By adding or rolling current retirement funds over into a Precious Metals IRA, you can take back control of your financial well-being as you look forward to a rewarding life after working.
First, let’s explore the different metal options investors can choose from.
Perhaps most well-known and widely revered of all the metals is gold. Throughout history, this yellow-hued precious metal has been an economic or cultural mainstay of most, if not all, major society and nation-state across the globe. Gold's universal appeal and intrinsic value have allowed the metal to not only survive but also thrive through the rise and fall of the Egyptian, Greek, Roman, Spanish, and English empires. Nations have fought wars to gain it and spent fortunes to protect it, and in today's modern world, virtually every government maintains some form of circulating gold coin (although legal tender face values are often symbolic).
Gold popularity and demand are at all-time highs, and with a more-than-six-thousand-year legacy, the metal remains the most stable, portable, and universally recognized store of value ever known to the human race.
Often thought of as the "yin" to gold's "yang," silver is another universally popular precious metal. Like gold, silver boasts a long history of prestige and allure, leading to its reputation as a sound and reliable store of wealth for investors looking to diversify their portfolios and hedge against inevitable economic downturns. Silver is often more affordable than gold, allowing investors to accumulate more ounces of the metal per dollar. Silver, much like gold, has enjoyed consistently positive gains in its , adding to its attractiveness as a viable investment option.
Platinum and Palladium
Both platinum and palladium are silvery-white colored metals that, in their pure forms, are lustrous, ductile, and malleable. In addition to wide suitability to a variety of practical and industrial uses, platinum and palladium are revered investment metals. Both metals are struck in a variety of forms, including bullion and investment-grade coins and bullion bars.
Platinum is quite rare compared to its gold counterpart (10x rarer, to be more precise), positioning it is a relatively unique precious metal that, as a result, enjoys relatively high investor demand. Palladium is the newest precious metal offering from the U.S. Mint.
Investment-Grade vs. Bullion
In addition to the various types of metals to choose from, coins and bars also come in an array of “strike types.” For an investor still researching his or her asset options, it’s crucial to be informed on the two primary strike types when it comes to precious metals asset accrual: Bullion strikes and Proof strikes.
Bullion is refined gold, silver, or other precious metal and is often produced in both coin and bar form. Bullion is a commodity that derives its value primarily by its metallic weight, known as "spot price." Gold, silver, and other metal bullion are tied to their respective commodities markets and are therefore subject to the ups and downs of these markets (although these ups and downs traditionally tend to be far less drastic as those seen in consumer confidence-based markets like stocks).
Investment Grade Coins are precious metals issued in coin form and intended for longer-term investing. While these coins are legal tender and do carry fiat face values, their realized values are actually based on their rarity, condition, market demand artistic prestige, and other qualitative factors. These precious metals pieces do not trade on an index that may be influenced by industry-based projections, political pressures, or other global factors, resulting in values that are much more stable.
These coins are “graded” by third-party authorities like the Numismatic Guaranty Corporation, which legitimizes the coins' quality and enhances their appeal. Though both bullion and proof coins can be graded, proof coins usually have mintage numbers that a far smaller, making them good candidates to be valued for their rarity. Proof coins graded at the highest “Proof 70,” or PF70, level are deemed to be in “perfect” condition and, as a result, general enjoy the highest investment potential of any coin on the market. The stability and long-term growth potential of Proof 70 coins make them ideal for investors looking to shield their hard-earned money from drastic swings in the economy while sustaining and gaining wealth for the future.
We hope today’s exploration will aid you in your journey toward sound financial health and serve as helpful jumping-off points as you continue to research your best investment options.
If you would like to learn more about adding precious metals assets to your portfolio, we encourage you to sign up for our free investor’s guide or give our team of Precious Metals Experts a call (800-775-3504) today!