How To Make Your Precious Metal Investments Profitable? (A Guide From Seasoned Investors)

Precious metals are metals with high economic value and are scarce. They possess these qualities because they’re used as a security against inflation, a store of value, and used in industrial processes. Some examples of the most common precious metals include platinum, silver, and gold. We gradually elaborate a guide from seasoned investors to make precious metal investments profitable.

These metals have been popular and valuable since time immemorial. In the past, most countries used them to represent their currencies physically. Aside from that, they used them as a backup in case of an economic crisis. In today’s world, investors prefer purchasing precious metals as an asset.

Many invest in precious metals to diversify their portfolios and protect themselves from the effects of inflation or any financial uncertainty. Commercial buyers also utilize precious metals to make products like electronics and jewelry.

Of all the precious metals that exist, some are more famous for investment than others. For instance, most people prefer gold or silver before considering other options. It’s also worth noting that most of these investors use a coin grading guide to gauge the worth and market value of different coins before choosing to invest in them.

To know how to make your precious metal investment profitable, here’s a guide from seasoned investors:

1. Conduct Adequate Research

If you want your investment to be profitable, you have to be aware of all the essential aspects related to precious metals and also the trends in the market. In this regard, you need to conduct extensive research, such as the difference between numismatic and bullion goods or the contrast between tangible and intangible assets.

Furthermore, it would help if you educated yourself on the following:

Typical Uses Of Precious Metals: precious metals have benefits apart from being a currency. They include the following:

• Making decorations and jewelry
• Refining oil to extract gas
• Creating some automotive parts
• Making of some medical products or surgical instruments
• Silver is used in making some nuclear and solar appliances

Reasons To Invest In Precious Metals: Aside from their uses, it’s also essential to know some reasons to consider investing in precious metals. They include the following:

You’re guaranteed security from inflation: Many nations have negative or zero interest rates in the banks. Thus, central banks are introducing stimulus programs to increase the money supply. Having gold as an investment can help you during such times since you can convert the asset into cash in a financial crisis.

It protects investors from political issues: These investments can protect you from the effects of problems like trade and military conflicts and global pandemics.

Capital gains: When the prices of precious metals increase, you have a better chance of capital gains. If you decide to sell the asset, you’ll gain more because you’re selling at a higher price than the one you bought.

Increased liquidity: You can quickly sell or buy your precious metals, especially at a lower cost, especially if you’re in urgent need of cash. This is primarily applicable if you’re selling the metals online.

Diversifies your portfolio: Diversification is essential in managing your portfolio. Investing in precious metals allows this because they have unique risks and opportunities, and their cost varies. Moreover, the direction of precious metals is often different from the stock and bond markets.

Precious Metals Investment Options: You should research the many options involved in precious metal investment. When choosing the best alternative, looking at your financial goals, risk tolerance, and individual capabilities is essential. Some of the main options that you need to look into to make precious metal investments profitable include the following:

• Buying physical, tangible metals
• Future contracts
• Buying shares from companies that extract precious metals
• Precious metals options
• Contracts for difference (CFDs)
• Commodity Exchange-Traded Funds (EFTs)

Each option has its pros and cons. Therefore, you need to dive deeper to get further insight before settling on any alternatives.

Asset Allocation: As mentioned, there are risks and opportunities in investing in precious metals. Depending on your investment’s risk sensitivity, it’s advisable to allocate 5% to 15% of your portfolio to precious metals. This range will prevent you from losing opportunities by investing in other assets and exposing you to higher risks that other investments cannot fix.

Risks Involved: All investments have advantages and risks associated with them. So, in this regard, here are certain risks of investing in precious metals. Some of them include the following:

• Political instability, like wars in the mines where precious metals are extracted
• High-price volatility periods
• Reduced demand for some precious metals, especially when others gain more fame
• Introduction of other environmental regulations which might affect precious metals demand
• Failure of relevant industries to deliver and meet the high demand for precious metals

Once you’ve done adequate research on all the above, plus other aspects that you may have in mind, you can incorporate the right strategies to keep you on the right track. For instance, you can use some risk management techniques to help reduce the chances of being affected by these risks and actively manage them.

2. Stay Up-To-Date On the Prices Of The Metals

It’s essential to always be on the lookout for the buying and selling prices of precious metals because they change from time to time. The good thing is that technology has made most things more accessible, and you can quickly get an update just by clicking a button.

Apart from knowing the process, it’s essential to know what the prices depend on. The reason is that they’re a valuable tool in monitoring the market and economic condition. Some of the factors that affect these prices include the following:

• Demand And Supply: When there’s a high demand or future expectation of increased demand for precious metals, the prices increase. On the flip side, lower demand for metals reduces their costs. This can guide when buying and selling the valuables.
• Monetary Policies And Interest Rates: Low-interest rates and fewer regulations from the central banks translate to higher prices of the metals since there’s a high chance that the economy will experience inflation, regardless of their location in the world. On the other hand, strict regulation by central banks and higher interest rates causes the prices of precious metals to reduce since there’s no expectation of inflation.
• The US Currency: Since precious metals are traded in US dollars, a strong dollar effect can cause a reduction in the prices of precious metals. On the contrary, a falling dollar leads to an increase in precious metals prices.
• Political Uncertainty: Political instability has many adverse effects. It makes investors refuse to invest, causing existing ones to increase risks and security due to price changes. Also, areas with this instability experience a disruption in the supply chain, causing an unexpected price increase to cater to the shortage.
• Economic Data: Demand for assets like gold is propelled by inadequate global financial data. On the contrary, riskier metals like palladium depend on economic growth and updated economic data to grow. 

This data can help you price your assets when you want to sell them. In addition, it can help you avoid getting deceived when purchasing from a seller since you have a rough estimate of the prices.

3. Purchase From Renowned Precious Metals Dealers

It’s critical that you do proper research on the wholesalers that sell these precious metals to avoid getting scammed. If possible, look for renowned people with a history of selling legitimate precious metals to customers. 

It will also help if you consider asking your friends, colleagues, or family members if they have an idea of a reputable precious metal seller. This way, you can ensure that you’re purchasing quality items and reduce the risk of losing your money in the process. Another viable option is checking with Professional Numismatists Guild or Industry Council for Tangible Assets to get the proper guidance before buying the valuable assets.

4. Ensure Your Investment Is Flexible

Experts recommend that you allocate between 5% to 10% of your total assets to other things. You can opt to add the amount of the individual retirement accounts or invest it in purchasing land or property. 

You can use this amount as a security or hedge against other investments. They play a role similar to that of an insurance policy by ensuring that you have security. However, you’ll still be sure if a risk occurs since you’ve already invested in other assets.

Bottom Line

Investing in precious metals is one of the best investments in today’s world. Some examples of these metals include gold, silver, pallidum, and platinum. Apart from the store of wealth, precious metals serve as security in economic and political turbulences. Like any other investment, there are specific strategies you should follow if you want to make precious metal investments profitable. 

Experts recommend that you do the following: proper research to know the trends in buying and selling the metals, their uses, and different investment options; purchase from renowned sellers; staying up to date with the prices of the metals and knowing the factors that affect the costs, and also, ensuring that your investment is scalable. 

It’s highly advisable to have multiple investment options and avoid banking on one, just in case it gets affected by a factor like economic instability. One assurance about following all the above tips is that you’ll have a profitable investment in precious metals, which can help open more investment doors.