Are Precious Metals a Good Investment?
Precious metals are considered a good way to diversify your investment portfolio and to hedge against inflation.
The most popular precious metals for investment are gold, silver, and platinum, but there are also other rare platinum group metals such as palladium, rhodium, iridium, ruthenium, and osmium. All of them have unique features and investment characteristics.
Gold is considered a traditional store of value. Gold is purchased not only by private investors, but also by central banks to replenish gold reserves. Jewelry accounts for half of the global demand for gold, investment demand is about 40%, and 10% is used in the production of electronics.
Silver is also used for jewelry, in addition, it is used in electronics, medicine, chemical and military industries.
Platinum is in general similar to silver, but has a higher density and melting point, is used not only in jewelry, but also in automobile gas filtration devices and as a catalyst in the chemical industry.
Palladium is used in the automotive industry for about 80%, this metal filters some substances better than platinum and has risen in price by 3 times over the past few years.Palladium is used in the automotive industry for about 80%, this metal filters some substances better than platinum and has risen in price by 3 times over the past few years.
Now let's figure out how the precious metals market works and which metal is a better investment.
It is customary to divide the precious metals market agents into primary and secondary. The main participants on the primary market are mining companies, refineries, industrial consumers and institutional investors. On the secondary market, precious metals can be bought both in physical form (bullion and coins) and in virtual form (online trades, stocks, futures, ETFs, etc.). Access to virtual trading is provided by commodity exchanges that organize the trading process, unite buyers and sellers, and set prices. Most often ordinary, - investors place their money into assets through intermediaries - banks, investment funds or brokers.
Gold is a traditional choice for long-term investments, as a defense against systemic financial crises, inflation, military and political crises. When forming a portfolio, various factors must be taken into account. Gold and silver in a portfolio are highly correlated, so they will behave in the same way, and this can increase risks. Platinum and palladium are in high industrial demand and are not a major investment metal, so they are subject to other factors and can go well with gold.