Part 2 of 3: Evaluating and Choosing Investment Methods
- Employ a physical broker. A broker will provide you with access to the various investment vehicles that you can use to invest in precious metals.
- Get an online brokerage account. Such an account will allow you to access precious metals markets without having to pay an agent to execute trades for you.
- Evaluate mining company stocks. ...
Should you invest in precious metals?
Investors can participate in the base metals market by buying shares of companies like U.S. Steel, futures, options, and various ETFs. Precious metals offer the widest field of opportunities for investors, with mining companies, ETFs for both stocks and the metals themselves, options, futures, and even direct purchases of physical metals.
What are precious metals stocks?
Precious Metals Stocks. The precious metals sector includes companies that explore for, mine and market metals, including gold, silver, platinum and palladium.
What are the Best Metal Stocks to invest in?
These companies focus on keeping costs down so they can maximize the value of the metals they produce. Here are three top metal stocks worthy of an investor’s consideration: A leader in producing industrial metals. A diversified manufacturer of steel and steel products. A leading precious-metals streaming company.
What is the relationship between the economy and precious metals?
The value of precious metals, on the other hand, tends to have an inverse relationship to the economy. That’s due in large part because investors buy these metals to protect their wealth or to hedge against inflation, which is more likely to rise after central banks lower interest rates to counter an economic downturn.
A guide to investing in precious metals
Matthew is a senior energy and materials specialist with The Motley Fool. He graduated from Liberty University with a degree in Biblical Studies and a Masters of Business Administration. You can follow him on Twitter for the latest news and analysis of the energy and materials industries: Follow @matthewdilallo
Gold
Gold is the most well-known and investable precious metal. It's unique for its durability (it doesn't corrode), shaping capability, and ability to conduct heat and electricity. While it has some industrial uses in dentistry and electronics, it's primarily used to make jewelry or as a form of currency. It has long been a store of value.
Silver
Silver is the second most-common precious metal. It's an important industrial metal used in the electrical, electronics, and photography industries. For example, because of its electrical properties, silver is a vital component in solar panels. Silver is also a store of value that's used to make jewelry, silverware, coins, and bars.
Platinum
Platinum is one of six platinum-group metals (PGM) that also includes ruthenium, rhodium, palladium, osmium, and iridium. They all have similar properties and often naturally occur in the same mineral deposits.
Palladium
Palladium is another PGM with important industrial usage. It is used in electronics and industrial products, dentistry, medicine, chemical applications, jewelry, and groundwater treatment. While rare and highly valuable for those purposes, investors don't put as much emphasis on palladium as they do on other precious metals.
Advantages and disadvantages to investing in precious metals
A hedge against inflation: Precious metals prices tend to rise at or above the inflation rate.
Risks of investing in precious metals
In addition to some of the disadvantages of investing in precious metals, there are other risks investors should consider. One of the biggest is price volatility. Several factors can drive precious metals prices, including changes in the economy, Federal Reserve policy, investor demand, mining supply, and inflation.
Why is it important to invest in precious metals?
Therefore, investing in precious metals can protect your wealth when you need it most. This is especially true for entrepreneurs.
Why invest in precious metals ETFs?
Investing in precious metals ETFs can provide much-needed cash flows during times of market downturn and slowdowns in your business cycle — plus, gold and silver are strategic long-term holds that can preserve your wealth in the event that your business has to close its doors.
What is the purity of gold bullion?
Exercise caution whenever you buy gold or precious metal bullion, and ensure that you only purchase bars or coins that list the name of the manufacturer as well as its weight and purity grade. In most cases, legitimate gold bullion will have “99.99%” marked on its face, which denotes its purity.
What does 99.99% mean on gold?
In most cases, legitimate gold bullion will have “99.99%” marked on its face, which denotes its purity .
Where are ETFs listed?
ETFs are listed on public exchanges that can be brokered through third-party vendors or financial advisors. Talk to your financial advisor about investing in popular, low-risk gold or precious metals ETFs before you get started investing in gold and precious metals.
What is the best way to diversify?
Diversification is a tricky business. You either diversify to achieve a desired rate of return at a given risk level, or diminish the risk required to achieve a desired financial return. No matter your level of sophistication, I’ve found that the best path toward true diversification is to invest in a variety of assets, including alternative assets that aren’t traditional stocks or bonds.
Is gold bullion taxable?
However, gold bullion held for less than one year is taxed as regular income.
What are the costs associated with precious metals?
Secondly, there are transaction costs associated with precious metals investing. If you buy physical gold, there’s a company in the middle making a profit. They buy it at wholesale prices, turn it into fine investment-grade gold, and sell it at retail prices. There are potentially shipping costs, and there is a cost associated with security and storage, along with a risk of theft or loss. If you instead invest in an ETF that holds precious metals, they have an expense ratio, which covers security and all the administrative costs of managing the fund and their hoard of metal.
Why are precious metals used as money?
Put simply, precious metals serve as a hedge against market volatility, political instability, currency weakness, and economic collapse. Because they are chemically unique, physically rare, and easily malleable, gold and silver have been used as money across much of the world for thousands of years.
What are the pros and cons of holding precious metals?
The rest of this guide discusses the pros and cons of holding precious metals in the form of 1) physical gold and silver, 2) ETFs and options, or 3) miners and streaming/royalty companies, and explains how to approach gold and silver valuation.
What are the downsides of precious metals?
Downsides: Commodities including precious metals produce no cash flows themselves and can be quite volatile. Most precious metal miners are historically poorly-managed companies that lose a lot of money.
What are the advantages of mining?
The advantage of miners is that in theory they can get around a lot of the problems of precious metals investing. Whereas precious metals don’t produce cash flows and cost money to manage, miners do produce cash flows and often pay dividends.
Why is gold and silver important?
Investing in gold and silver is useful because precious metals are a separate asset class from stocks and bonds, and are partially uncorrelated and have their own unique risks and opportunities. This makes them particularly suitable for using as part of portfolio diversification strategy.
Why is it so hard to invest in gold and silver?
Learning how to invest in gold and silver is challenging because directly investing in any commodity is filled with headwinds against you. First of all, commodities, including precious metals, don’t produce any cash flows like a profitable business or even an interest-paying bond does.
Why are precious metals valuable?
Because of their scarcity, precious metals are valuable—much more so than the base metals. They are used for jewelry, art, coins, dental work, medical devices, electronics, and investment purposes. Like base metals, a wide range of investment vehicles are available to those interested in the precious metals markets.
How do investors participate in the base metals market?
Investors can participate in the base metals market by buying shares of companies like U.S. Steel, futures, options, and various ETFs.
What are rare earth metals used for?
Elements such as lanthanum (La), Cerium (Ce), praseodymium (Pr), and neodymium (Nd) are used in the manufacturing of electronics like smartphones, computer memory chips, cameras, and e-readers.
What are base metals?
Base Metals. In chemistry, metals that oxidize or corrode easily are referred to as base metals. These industrial metals include copper (Cu on the periodic table), nickel (Ni), aluminum (Al), zinc (Zn), lead (Pb), tin (Sn), and iron (Fe)/steel (an alloy of iron and carbon). Base metals are generally plentiful and are used in a variety ...
Why are rare earth metals important?
Despite their abundance, rare earth metals are valuable because they are hard to get, and they are in high demand .
What are the elements that are softer than other metals?
They are softer and more ductile than other metals and are less reactive than most elements. Precious metals include silver (Ag), gold (Au), platinum (Pt), and palladium (Pd). Because of their scarcity, precious metals are ...
What is the periodic table?
The periodic table represents the earth's known chemical elements, and some of them make excellent investments. Rare earth metals, along with a selection of elements known as base and precious metals, provide today's investors and active traders with a variety of trading opportunities.
How to invest in precious metals?
There are two main ways to invest in precious metals: 1 Buying the gold, silver or platinum outright 2 Buying an exchange-traded fund (ETF) or a mutual fund with gold in the mix
Why is it important to invest in something you don't understand?
The most important thing is that you don’t invest in anything you don’t understand. Having a good investment professional on your family’s team can help you tell a good investment from a bad one and help you build wealth over time.
What is the most valuable commodity?
Throughout history, gold, silver and other precious metals have been highly sought after and considered the most valuable commodities someone could own . . . but are they good investments?
Why is the dollar worth something?
The only reason the dollar is worth something is because it’s a worldwide accepted form of trade. It’s a transaction based on trust. These precious metals are just a just a commodity like a bushel of wheat or a barrel of oil or, in more recent times, toilet paper and hand sanitizer. In times of uncertainty, people run to gold out ...
What is platinum used for?
Platinum is most commonly used in jewelry. But it may surprise you to know that it’s also used to make dental fillings, pacemakers and car parts like converters and spark plugs. Not only that, it’s often used in chemotherapy. 3
What do you think of silverware?
When you think of silver, you probably think of your grandma’s silverware (and the time she paid you to polish every spoon she owned) or your favorite necklace. But you probably don’t think of its use in mirrors, dental fillings, batteries or even those touchscreen gloves you got for Christmas. 2
Why are gold and silver so unstable?
The prices of gold and silver are so unstable (and have been over time) that the only use for them in an economic crisis would be to hope someone would take your silver coins or watch in exchange for a pack of toilet paper or a can of gas.
What is precious metals?
The precious metals sector includes companies that explore for, mine and market metals, including gold, silver, platinum and palladium.
Where is Corvus Gold located?
Its projects include North Bullfrog and Mother Lode. The company was founded on April 13, 2010 and is headquartered in Vancouver, Canada. more
What is Taseko Mines?
Taseko Mines Ltd. operates as a mining company, which engages in the acquisition, development, and operation of mineral deposits. It holds interest in Gibraltar, Florence Copper, Aley Niobium, Yellowhead, New Prosperity, and Harmony projects. The company was founded on April 15, 1966 and is headquartered in Vancouver, Canada. more
Where is Pretium located?
Its projects include Snowfield and Brucejack which are located in British Columbia. The company was founded by Robert Allan Quartermain in 2010 and is headquartered in Vancouver, Canada. more
Where is Gatos Silver located?
engages in the exploration and development of precious metals. The company was founded on February 2, 2011 and is headquartered in Greenwood Village, CO. more
Where is Platinum Group Metals located?
It focuses on production of platinum and palladium. The firm deals with waterberg project located on the Northern Limb of the Bushveld Complex in South Africa. The company was founded by R. Michael Jones on January 10, 2000 and is headquartered in Vancouver, Canada. more
Where is Coeur Mining located?
Coeur Mining, Inc. engages in the exploration and development of silver and gold mining properties and mines located in United States, Canada and Mexico. The company operates through the following segments: Palmarejo, Rochester, Kensington, Wharf, and Silvertip. Coeur Mining was founded in 1928 and is headquartered in Chicago, IL. more
Why should investors pair industrial metals with precious metals?
Given the inverse relationships between these types of metals, investors might want to consider pairing a company that focuses on industrial metals with one that focuses on precious metals to help smooth out returns.
Why do precious metals have an inverse relationship to the economy?
In large part that’s because investors buy these metals to protect their wealth or to hedge against inflation, which is more likely to rise after central banks lower interest rates because of an economic downturn.
What precious metals does Wheaton own?
Wheaton Precious Metals has a diversified portfolio of streaming contracts. Its agreements give it the right to purchase gold, silver, palladium, and cobalt from a variety of leading mining companies at currently producing mines, as well as those in development.
What are the two main categories of metals?
The metals industry and the economy. Metals companies largely fall into two categories: Those focused on precious metals like gold and silver. Those that produce or use industrial metals such as iron ore, aluminum, and copper.
What are the two types of metals?
Metals companies largely fall into two categories: 1 Those focused on precious metals like gold and silver 2 Those that produce or use industrial metals such as iron ore, aluminum, and copper
What is WPM mining?
Wheaton Precious Metals ( NYSE:WPM) is one of the largest streaming companies in the world. As a streamer, it provides mining companies with an up-front payment to help develop a project in exchange for the right to purchase a portion of the production at a fixed cost.
What is Nucor steel?
Nucor ( NYSE:NUE) is a diversified North American steel and steel products company. It makes steel bars, plates, and beams, and it produces steel products such as fasteners, pipes, and wire. Nucor also operates a leading scrap-metal business that recycles and transports ferrous (iron-containing) and nonferrous metals.
Where is Wealth Minerals located?
Wealth Minerals has interests in Canada, Mexico, Peru and Chile. The company’s main focus is the acquisition and development of lithium projects in South America, with its flagship Atacama salar located in the world’s highest-grade and largest-producing lithium brine deposit.
What metals are used in electric cars?
Battery metals such as lithium, cobalt and graphite are essential to the lithium-ion batteries used to power electric cars, with demand expected to increase in the coming decades. As the energy revolution continues to unfold, automakers are becoming increasingly aware of the need to secure these raw materials in order to accomplish their ambitious ...
What is Edison battery metals?
Edison Battery Metals, formerly Edison Cobalt, is focused on the procurement, exploration and development of cobalt, lithium and other energy metals properties. It currently holds a 100 percent interest in the Kittson cobalt project, which is comprised of 216 unpatented mining claims covering a total area of approximately 4,440 hectares in Northeast Ontario, Canada.
How many cobalt claims does Battery Mineral Resources own?
In Idaho, US, the company owns 434 unpatented mining mineral claims in three 100 percent owned properties containing 14 significant cobalt prospects and covering an area of 38 square kilometers. Battery Mineral Resources continues to stake and acquire additional cobalt properties across the US.
How many investor kits can you request?
We have limited the number of investor kits you can request to 20.
Is Molo a phase 1 mine?
Phase 1 is fully funded, with Molo expected to be the next graphite mine to enter production outside of China. The company does not require any more money to reach commissioning, which is on schedule for Q2 2022, after receiving US$29.5 million in funding in May 2021 from its strategic investor, Vision Blue Resources, founded by Sir Mick Davis.
