How to Invest in Precious Metals

Diversifying with Brilliance

In the investing world, there are a handful of different assets and approaches that people take towards preserving or gaining wealth. Of these multiple decisions, purchasing and investing in precious metals is one of the longest-standing methodologies among investors.

Per a recent study conducted by FactMR, the global precious metals market stood at $230Bn in 2022, with forecasts projecting it to reach $445Bn by 2033. The size of the market is projected to grow continually over the next decade or more, showing just how reliable it is as a store of value for investors.

The below content will cover various ways to invest in precious metals, as well as the type of investor those particular approaches best suit.

Buy in Physical Form

One of the most classic investment approaches is to simply buy the precious metal in its physical form. The Royal Mint and other precious metal dealers will typically sell precious metals in the form of coins, bullion bars and others. Below are the general details of each physical form:

  • Bullion bars/coins: The weight and size of these physical assets can range anywhere from one gram up to a kilogram. As you’d expect, purchasing higher weight increments will come at a higher overall cost for investors.
  • Jewelry: This is a less common approach amongst investors purely looking to store their cash in precious metals, as it comes with some secondary risk from the added costs due to jewelry design and creation.

Ultimately, buying precious metals in the physical form is great for investors who are looking to hold a physical asset in their hands. This does come with the “risk” or requirement to store and safely keep the precious metal that you purchase.

Invest into Funds

A common alternative to purchasing precious metals in their physical form is to simply invest in funds. With the growing use of investment funds and the digital landscape, many investors have shifted away from physical investments and have begun purchasing shares in funds that suit their investing desires. The three most common types of digital investment vehicles include ETFs, stocks and futures.

  • ETFs: An ETF is a basket of securities that tracks the underlying index. By investing in an ETF for precious metals, you are essentially purchasing a position in a fund covering gold, silver, platinum or palladium. The fund's exposure to precious metals can be through either commodity futures or through actual physical ownership.
  • Stocks: A somewhat indirect way of investing in precious metals can come by investing in stock securities of companies that have significant exposure to the market. This can include mining companies, streaming companies and royalty companies.
  • Futures: By purchasing a futures contract, you are entering a legally binding agreement to buy or sell an asset on a specific date or during a specific month. Purchasing a futures contract provides investors with exposure to precious metals without having any physical tie to a stock or fund.

Indirect Investment via Stocks

While this approach was briefly mentioned above, it truly does deserve its own section within the article. Investing in the precious metals market does not have to come by investing directly into precious metals or a fund that directly deals with the precious metals market. Instead, consider purchasing shares of stock in companies that have a role in the precious metals industry. This could include any of the following:

  • Mining companies: The most obvious component of the precious metals market is the mining company itself. These companies are the ones who work and extract the precious metal that you are looking to invest in.
  • Jewelry production companies: Alternatively, investors can purchase positions in jewelry production companies. This is a bit of an indirect and higher-risk investment approach as other variables influence the success of a jewelry company.
  • Precious metal streaming companies: A metal streaming company provides upfront funding for mining companies that need the capital to operate. In return, the streaming company will purchase the mined precious metals at an agreed-upon discounted rate. This is a more direct line of investment into the precious metals market.

The Decision is Yours

At the end of the day, the route that you pursue to invest in precious metals is pretty loosely defined – you have a lot of different opportunities and decisions to make. You should consider what type of investor you are and the best investment approach that suits your life and/or desires.

Buying physical assets might make the most sense for some investors while being seen as an unnecessary burden for others. Contrarily, some investors might prefer to avoid the digital trading market as they don’t understand it much. There isn’t a one-size-fits-all solution – evaluate your circumstances and make your decision!

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