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Keep the Glitter in Gold and Silver Investments

By Douglas Charney

Gold has always been well sought-after. European explorers sailed to uncharted territories and fought wars in search of the precious metal, and people risked their lives to travel across the North American continent for a chance to get rich in the California Gold Rush. In historic times, gold meant wealth, just like investments mean wealth today, but do people still invest in precious metals, or have they lost their luster in the modern economy?

Precious metals are actually very popular investment instruments, especially in periods of inflation and economic uncertainty. Plus, investing in metals includes a certain element of glamour. Fine jewelry and expensive decorations made from gold and silver elicit images of wealth, stature and power. Think of all the movies that use buried treasure or gold bars as the ultimate prize.

If you’re interested in investing in precious metals you need to understand your options, just like any other investment. To add gold or silver to your portfolio, consider the following information and background on the precious metals market.

Why Invest in Gold and Other Precious Metals?

Gold has special characteristics that set it apart from other commodities. Throughout history, people used gold in trade as money because it was scarce, transportable, non-perishable, divisible and easily sold at current market rate anywhere in the world.

Traditionally, gold has been used to store wealth in areas of economic or political instability. For example, Europeans kept bags of gold dust or coins hidden in door jambs or under the floors of their homes. Asians often liked gold teeth, so their wealth could stay with them at all times. This link between the popularity of gold and economic or political crisis is reflecting even in stable countries like the United States. Many investors use gold as a hedge against inflation, political unrest or economic downturns. However, investing in gold is like betting against the well-being of your fellow citizens.

Pros and Cons

People who like to invest in gold often have a negative outlook on the world and the economy. For example, history shows that when the country is on the verge of war, the value of gold normally increases. Investors have the opinion that even if the value of the dollar falls to zero, gold still has value. This thinking is actually one of the reasons behind ownership of jewelry. Jewelry is like portable wealth. If times get tough, you can always sell a ring or necklace to survive through the difficulty.

Keep in mind, investing in gold or other precious metals has a number of drawbacks. If you buy gold coins or bullion, then it just sits there and doesn’t create additional wealth or pay interest. Plus, metals must be stored or hidden somewhere, which actually costs you money for insurance and safety. If your wealth isn’t stored safely, it can be easily stolen or lost.

How Can You Invest in Gold?

If you are interested in investing in precious metals, then you have a variety of options. You can buy gold bullions or coins issued by the United States, Mexico, Canada, South Africa, or other governments through reputable dealers and brokerage firms. In this case, you will actually have pieces of gold in your home or safety deposit box.

If you want to sell your gold pieces, you have to pay a firm to test it for authenticity. They actually scratch the surface to ensure the piece is real, and they put a small amount of acid on it to determine the quality. Gold pieces are, therefore, more difficult to sell than other investment options. If you never take possession of the gold pieces, you’ll need to use a certified vault holder. These companies will eliminate the need to have your gold tested when you decide to sell it. The same “rules” apply to silver.

You can also invest in gold mining companies, or buy stock or mutual funds in gold mining companies, which may pay dividends. Additionally, you can invest in Precious Metals Portfolio, which are similar to mutual funds, organized by reputable brokerage houses.

One way to invest in gold is through Gold and Precious Metal Mutual Funds. These investments may also pay dividends, and you get the equity of the companies that produce the gold and silver. Some gold funds actually keep gold bullions as part of the fund, which offers the benefits of owning the gold from the gold companies without the headache and costs of storage and insurance.

Gold and Silver in Your Future

Precious metals are not only beautiful, but they’re also a way to diversify your portfolio. People often find security in their longevity and stability, especially during uncertain economic or political times. However, investing in gold and silver can seem like a big hassle unless you know and understand your options.

Unlike stocks and mutual funds, someone has to store and protect your gold investments. Investing in gold and precious metals mutual funds offer the possibility to earn interest through payment of dividends, and eliminates the need for storage and protection.

Are gold and silver for you? This information might be of help in making decisions for your financial future, although it is not intended as a solicitation to buy or sell any specific product.

Buying precious metals as a source of diversification should only be considered by sophisticated investors who are prepared to assume the risks inherent in the bullion market. Any bullion or coin purchase represents a transaction in a non-income producing commodity and highly speculative. Therefore, precious metals should not represent a significant portion of an individual’s portfolio.

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