Gold and silver offer many advantages for investors, but they behave differently than stocks or bonds. Like any investment, it’s important to research precious metals before you invest in them. This post will introduce you to silver and gold investing by answering frequently asked questions about these metals.
What are the benefits of investing in gold or silver?
Silver and gold add diversity to a portfolio. Because they behave differently than stocks or bonds, precious metals typically retain their value through difficult economic times. Gold in particular tends to rise when the U.S. stock market falls.
Gold and silver also serve as a hedge against inflation. Since there is a finite supply of gold and silver in the world, the value of gold and silver holds when inflation devalues currency such as the U.S. dollar.
What are the risks of investing in gold or silver?
Like any commodity, the price of gold and silver fluctuates. Global supply and demand, the cost of production, and interest rates are some of the main factors that determine the price of precious metals. These factors can drive down the value of silver or gold when demand is low, supply is high, or interest rates are high. And, if you own the physical metal, there is a risk that your investment may be stolen or lost.
Should I invest in silver or in gold?
While both silver and gold are precious metals, there are differences that affect the price of each. One key difference is that silver is used in industrial applications. This means that silver may decline in value in times of economic recession or when demand slips for other reasons. For instance, silver is a key element used to manufacture film. As digital media has replaced film, some of the demand for silver has dropped. On the other hand, silver offers exposure to broad economic trends, since a booming economy leads to a higher demand for silver in industrial applications.
Gold is valued more highly than silver. While prices vary, gold trades in hundreds of dollars per ounce while silver trades in tens of dollars per ounce. (This is true even though silver is scarcer than gold.) The lower cost of silver makes it easier to make small investments in physical bars or coins. On the other hand, since gold is not tied to economic activity in the same way as silver, gold often serves as a better safe haven in times of recession.
What options do I have for investing in gold or silver?
There are several ways to invest in gold or silver. One option is to buy the physical metal in the form of coins or bars. You can store these yourself or work with investment companies that store them in a vault tax free till withdrawals at retirement. Another option is to invest in an ETF tied to the price of silver or gold. Some investors use futures to invest in gold or silver. Others invest in mining stocks, since the value of these stocks is tied to the metal that a company mines. If you want to invest in mining stocks without the risk of investing in a single company, you can buy shares in ETFs that purchase either gold or silver mining companies.
Silver and gold investing may be the right choice for your investment strategy, but understanding the benefits and risks is essential for determining if they are right for you. Use the information above to start thinking about whether gold or silver is right for your portfolio, and what the best way for you to invest in gold or silver is.