• admin
• November 8, 2023
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Four factors to consider when deciding to invest

Looking for ways to prepare for future uncertainties? A solution for some may be investing in precious metals, such as gold and silver. Here’s what to know.

To varying degrees, both gold and silver may provide a hedge in a potential economic or market downturn, as well as during sustained periods of rising inflation. Understanding the difference between how the two metals are used, their economic sensitivities and technical characteristics can help you determine which metal may benefit your portfolio.

Here are four factors to consider when deciding to invest in gold or silver:

1. Silver May Be More Tied to the Global Economy

Half of all silver is used in heavy industry and high technology, including smartphones, tablets, automobile electrical systems, solar-panel cells and many other products and applications, according to the World Silver Survey. As a result, silver is more sensitive to economic changes than gold, which has limited uses beyond jewelry and investment purposes. When economies take off, demand tends to grow for silver.

2. Silver Is More Volatile than Gold

The volatility in silver prices can be two to three times greater than that of gold on a given day. While traders may benefit, such volatility can be challenging when managing portfolio risk.

3. Gold Has Been a More Powerful Diversifier than Silver:

Silver can be considered a good portfolio diversifier with moderately weak positive correlation to stocks, bonds and commodities. However, gold is considered a more powerful diversifier. It has been consistently uncorrelated to stocks and has had very low correlations with other major asset classes—and with good reason: Unlike silver and industrial base metals, gold is less affected by economic declines because its industrial uses are fairly limited.

4. Silver Is Currently Cheaper than Gold

Per ounce,silver tends to be   cheaper than gold, making it more accessible to small retail investors who wish to own the precious metals as physical assets. 

How You Can Invest in Gold and Silver

One of the attractions of gold and silver is that both can be purchased in a variety of investment forms:

• Physical Metals: Unlike stocks and bonds, gold and silver can be purchased as physical assets, as either bars and coins held as part of a Morgan Stanley brokerage account or as American Eagle coins held in a retirement account. The metals would be held by a third-party depository, not Morgan Stanley, though investors can take physical delivery if they want to store it themselves.

Holding bars and coins can have downside, though. For one, investors often pay a premium over the metal spot price on gold and silver coins because of manufacturing and distribution markups. Storage and even insurance costs should also be considered. 

• Exchange-Traded Funds: ETFs have become a popular way for investors to gain exposure to gold and silver, without having the responsibility of storing a physical asset. You can buy shares and keep them in a traditional brokerage account. The fund’s operator is responsible for handling the costs of holding a physical supply of gold or silver and charging an expense ratio. But investing in an ETF doesn’t give investors access to the underlying metals. Also, some precious-metal ETFs are taxed as collectibles and don’t benefit from lower long-term capital gains rates.
• Mining Stocks and Funds: Some investors see opportunity in owning shares of companies that mine for gold and silver, or mutual funds that hold portfolios of these miners.

• admin
• October 31, 2023
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Precious metals investing for beginners

Gold and silver have long been sought-after – from jewellery and coins to bullion and now even exchange traded products (ETPs).

But where do you start, and which types of precious metals are investors typically attracted to?

We’ve put together an uncomplicated overview of investment in precious metals with our four key takeaways.

This information is intended as general information only, and you should speak to a financial adviser or other professional before deciding to invest in precious metals.

1. Why do people invest in precious metals?

Precious metals are best known as a store of wealth and have been for generations. They can offer a strong long-term return, hedge against inflation and falling equities and are highly liquid, meaning you can easily convert it to cash if and when you need it.

Precious metals are also considered by many investors as alternatives to traditional investments like equities and bonds when looking at portfolio diversification.

2. What’s the difference between gold, silver and platinum for investment purposes?

As with stocks and shares, each metal choice depends on investors’ personal circumstances, budget considerations and the length of time investors want to keep their investments. Whilst there are benefits and risks in each, investors can use precious metals to complement other asset classes and broad-based portfolios.

There are a few differences with each metal, as outlined below:

Gold

According to the World Gold Council, “Gold is a liquid asset, ranking at levels comparable to many global stock markets […] Its liquidity is often sourced during periods of stress in the markets, one of its appealing qualities.”

As a global store of value, gold can also provide financial cover during geopolitical and macroeconomic uncertainty.

According to The Perth Mint’s SMSF Whitepaper, “For Australian investors, gold has historically been the highest performing single asset when equity markets have fallen.” Looking back on history, gold “has provided robust portfolio diversification because it is uncorrelated to equities”.

Typically it performs best when equity markets are weakest or when there’s global uncertainty. Gold also generally performs well during high inflation or weakening local currencies.

Silver

Silver’s advantage is that it’s significantly cheaper to buy 1oz of silver compared to say 1oz of gold. This makes it more accessible if investors are starting out or have a smaller budget. In terms of its use, silver is predominantly used for industrial purposes, including medical equipment, solar, batteries and electrical appliances. Because of its uses, the price of silver tends to be in line with economic growth, but this also makes it more volatile. In conjunction with professional financial advice, looking at the gold to silver ratio can help investors make an informed decision as to which precious metal to invest in at any given time.

Platinum

Like silver, Platinum is used widely for industrial uses as well as jewellery, but its price is influenced by geopolitical issues where it’s mined.

Currently, the majority of the world’s mined platinum comes from South Africa, Russia, Zimbabwe, Canada, USA and Australia. The main advantage of platinum is that it generally has a negative correlation with other assets and has historically done well in times of economic recovery.

3. Precious metals commonly purchased by investors

Bullion bars and coins

Pure gold and silver coins, cast and minted bars come in varying sizes and purchase options to suit different budgets, though with this option investors need to ensure they have sufficient insurance and security if they plan on storing the bullion at home. Alternatively, investors can opt to buy, sell and store their high value precious metals in secure vaults if buying from a reputable mint.

Exchange-traded products (ETPs)

Many investors manage their precious metal investments in a stockbroking account. For instance, The Perth Mint offers an exchange traded product (ETP) called PMGOLD (ASX code: PMGOLD) which allows trading in gold via a stock broking account, similar to shares on the ASX. This is a good option if investors would rather not store gold at their homes, however investors can choose to convert holdings into any of The Perth Mint’s available bullion bars.

4. Where can investors purchase precious metal?

Whichever precious metal you consider, it’s important to buy from a reputable dealer – one who will give a competitive price for accurately assayed gold and silver. It’s also wise to know that precious metal prices vary throughout the day depending on global political, economic and other influences.

Why The Perth Mint?

Whether buying for long-term investment, in preparation for uncertain times or as part of a diversified investment portfolio, The Perth Mint’s investment products combine the convenience of investment solutions with an age-old trusted store of wealth.

To reflect the ever-changing price for precious metals, the prices displayed on The Perth Mint website update every five minutes for retail customers and every 15 seconds for depository online (DOL) customers, when the global precious metals market is open.

Our metals are responsibly sourced and manufactured at The Perth Mint Refinery and we offer a range of storage options. Download our How to invest in precious metals guide for more information or visit www.perthmint.com/invest/information-for-investors/

*Gold’s strategic role | The relevance of gold as a strategic asset 2022 | World Gold Council. (https://www.gold.org/goldhub/research/relevance-gold-strategic-asset-2022/16747)

DISCLAIMER

Past performance does not guarantee future results. The information in this article and the links provided are for general information only and should not be taken as constituting professional advice from The Perth Mint. The Perth Mint is not a financial adviser. You should consider seeking independent financial advice to check how the information in this article relates to your unique circumstances. All data, including prices, quotes, valuations and statistics included have been obtained from sources The Perth Mint deems to be reliable, but we do not guarantee their accuracy or completeness. The Perth Mint is not liable for any loss caused, whether due to negligence or otherwise, arising from the use of, or reliance on, the information provided directly or indirectly, by use of this article.