[Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. / REUTERS]
Have you ever felt a draw to those glimmering pictures of gold on the business pages, or been tempted to put down some money when you hear the price of platinum? However glamorous the world of precious metal-buying may sound, investing in these rare commodities can seem more daunting than lavish. Prices fluctuate, which makes getting started seem like an art form for only the truly skilled.
With insight from a seasoned professional, however, investing might be easier and more realistic than you think. Understand what you’re getting into before it’s too late.
Know the playing field
Step one towards investing in precious metals is to familiarize yourself with the market. The price of precious metals, such as gold and silver, can be affected drastically by a number of factors.
“When considering the price of gold/silver, it’s important to remember that this is really a reflection on the U.S. dollar or Canadian dollar becoming stronger or weaker,” said Dave Martinez, President of Silvercoins.com.
Trevor Ewen, a personal finance writer for Pearoftheweek.com, adds, “Conventional market wisdom has long held that precious metals, and gold in particular, is really an index of fear and sentiment.”
In other words, precious metals gain the most worth during and through an economic crisis, according to Ewen.
Choosing the right time
Like any investment, knowing when to buy and when to sell is the crux of investing. In order to do so wisely, studying the market and recent trends is a crucial step in getting the best bang for your buck.
Andy Man is an Independent Trainer from Canada who co-founded Ser Man Traders, a Vancouver-based company. He offers both a word of caution and a word of hope for potential investors.
“The gold and silver market has been very volatile in the past 5-10 years,” Man warned. “The precious metals market has become out of favor ever since the U.S. dollar has been gaining strength.”
“However, we could be at the end of the downtrend in gold and silver, as the market could be close to forming a bottom.” Man said.
How will we know when this occurs? Man’s tip for success is to look for a weakening U.S. dollar.
The pros of investment
There are many options of what to buy when investing in precious metals. When the right time does arrive, be sure you have considered which option is the best fit.
Martinez lists many, including “bullion coins, bars, private minted rounds, junk silver, numismatics,” and more.
For beginner investors, he recommends government bullion coins, as they “are recognized worldwide and are highly liquid and traceable, as well as more difficult to counterfeit, unlike bars or generic rounds.”
Is investing worth it?
With the risk involved, is investing in precious metals worth it? According to Ewen, it depends on “your interpretation of its value.”
“My belief is that an investment is something that produces decent income for its price, or something that is valued measurably below its intrinsic value,” he said. “Physical precious metal shares are certainly not the former, as they will not produce any income.”
“In the latter case,” Ewen continued, “it’s possible that their relative cheapness create a great opportunity for hedging against the next crisis.”
If this type of security is appealing to you, with the right timing, investing in precious metals might be the ideal safety net.
According to Ewen, if you do decide to invest, financial advisors recommend that precious metal do not account for any more than 5 percent of investments in your portfolio.
Other opportunities on the horizon
Before you decide to make, or not make, an investment in precious metals, such as silver or gold, take a second to learn more about the many metals on the market.
Ryan Elbaz is the founder of Majesty Diamonds, one of the largest custom diamond sellers in the world.
“Platinum is another option to consider when buying precious metals,” Elbaz advises. “It is the rarest of precious metals and its uses are wide in scope.”
Despite platinum’s low value right now, Elbaz points out that predictions show a turn in the trend ahead.
“With the strength of the American dollar on the rise, and the emergent recovery of the Eurozone, all signs point to a resurgence of platinum in the marketplace,” he said.
A beginning chapter
There are no right or wrongs when it comes to investing in precious metals. By taking into account the seasoned expertise of a qualified, at-large trader or investors, however, you are on you way towards making the smartest choice.