How & Why You Should Invest In Precious Metals?

Find out How to Invest in Gold and Silver? What makes Gold & Silver Prices Move and Why you Should Invest in Precious Metals as a Diversification Strategy

What is Precious Metals Trading?

Precious metals are typically traded on the Commodity Exchange (COMEX) part of the New York Mercantile Exchange (NYMEX).  Other non-precious metals are traded on the London Metal Exchange.

What are the Precious Metals?

Typically the word precious metal refers to Gold, Platinum, Palladium, and Silver.  Precious means they are rare or have a high value.  The value of the metal is usually measured in Troy Ounces.

What Makes Precious Metal Prices Increase or Decrease?

The precious metal price is determined by a mixture of supply and demand variables.  If supply is restricted, this increases the value of the metal. If the demand for the metal outstrips supply, this increases the value of the metal.

Example of Why Gold Prices Move

Examples of demand include the purchasing of gold by the federal reserves.  This increases demand for an already limited supply of gold and pushes up the price.

If all the gold in the world were collected and smelted together, we would probably have a 25-meter squared cube.

Gold has no real discernible use apart from for jewelry, and the fact it is so rare and in demand for jewelry or coins is what maintains its value.

Example of Why Silver Prices Move

However, Silver is very different from gold.

Silver’s value tends to be more volatile than gold and can be impacted by the supply and the demand from industry and investors.

Silver is incredibly useful for industry, having the highest electrical conductivity of any element and the highest thermal conductivity of any metal.  Silver performs vital roles in electronics, photography, water purification systems, and deodorants.  Silver is a natural germicidal agent like other heavy metals but is not toxic to humans.

Why Invest in Gold and Silver?

Gold and Silver are often seen as investments that can hedge against the devaluation of currencies.  Worries about the dollar and the euro eventually losing most of their value drives investors to seek to collect as much gold and silver as possible.

How to Invest in Gold and Silver?

One can easily invest in silver and gold by buying coins and bullion.  Of course, the price of silver means it is easier to accumulate in smaller amounts over time.  A 2012 1 oz American Eagle coin costs approximately $30, whereas the gold version sells for approximately $2,000.

One can also invest in mining stocks specializing in exploration or excavation, precious metal ETFs or gold and silver futures.

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  1. I learnt a few things again. Like any commodity, the parameters of trading it are complicated. I get a lot of useful information from The Daily Reckoning in Australia, which is an online free publication


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