For many centuries, precious metals have always been prized assets. They have always provided security as they hold their value even in times of crisis. Precious metals have stood the test of time. Even when market prices dip, they never take long to increase. Investment experts often recommend investors to diversify their investment portfolio with some precious metals, such as gold and silver. This explains why it’s only wise to invest in precious metals during today’s uncertain economic times. Here are five reasons why you should invest in precious metals:
Precious metals offer remarkable appreciation and profit potential in the long term. If you look over the past decade, the price of gold and silver has increased by between 48–600%.
Precious metals can also be profitable for short-term investors. If you study recent trends, you’ll notice that there have been periods of price volatility, where prices have changed dramatically, both lower and higher. Experts have predicted that the volatility will continue in the future. Investors can take advantage of this and buy when prices are low, then sell when prices increase.
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2. Hedge Against Inflation
Precious metals have always been attractive to investors because they act as protection for purchasing power regardless of inflation. The price of gold and other precious metals typically rises during inflation. Also, when threats of a looming inflation rise, many people invest in precious metals hence pushing the demand and price higher.
3. Portfolio Diversification
Many investment analysts and professionals advise against putting all your eggs in one basket. If you’re an investor looking for an investment that will balance your portfolio, then you should invest in precious metals. This is because precious metals have no direct correlation to other investment options, such as stocks and bonds.
Precious metals are only affected by supply and demand. Portfolio diversification provides security in case of a crisis or political upheaval. Take, for example, the 2008 recession. Most families were gravely affected and have since not been able to recover fully. If they had precious metals in their portfolios, they would have avoided some of the losses.
Liquidity is the ability to convert an asset into ready cash. Cash is the most liquid, while tangible assets are less so. For example, if you own a house or a car, it will likely take you at least a few weeks, oftentimes even months, to sell them and get cash. Yes, property has value, but the entire process of selling it is long, exhausting, and involves a lot of paperwork. Besides, you are not guaranteed to eventually sell them. You run the risk of owning unwanted assets.
Precious metals offer instant liquidity. You can convert your precious metals into the currency of your choosing, such as pounds or dollars. You can do this in any country as most are the international currency standard. As a precious metal owner, you can rely on the assets for financial security.
5. Demand vs. Supply
The demand for precious metals has always been on the rise. Private investors want to buy them for portfolio diversification. At the same time, central banks and governments also want to buy precious metals for their reserves. In 2015 alone, central banks bought almost 600 tons of precious metals. Numerous industries also increase this demand for various purposes, such as electrical and medical gadgets.
On the other side of increasing demand is a waning supply. The mining and extraction of precious metals have continued to become more difficult as the years go by. The Earth is not making any more precious metals—at least not quickly enough to match the rate of extraction. It is estimated that we have more precious metals above the ground than below.
Further, we might have less than 20 years’ worth of mineable precious metal reserves. This is a positive indicator for investors that the price of precious metals will rise in the next few decades.
Precious metals have always presented an attractive investment option. This is because they have historically been known to hold their value and also be profitable. Reasons why you should invest in precious metals include hedge against inflation, portfolio diversification, appreciation, and liquidity. The demand for precious metals is also high, and will only continue to go higher while the supply continues to reduce over the coming years. This means that its price is going to rise further.