Before Beginning a Precious Metals Investment

Investment in precious metals is gaining popularity. There are a lot of people coming into the trading market who have never been involved in any type of investment before. They have seen the writing on the wall, though, and they understand that their savings may be worthless shortly.

This bit of wisdom is not enough, however, to protect anyone from investment errors. Too many people beginning to invest in precious metals can only think of gold coins.

They do not realize the full spectrum of precious metals available. Nor do they comprehend all the forms which these metals may take. The following should serve as an introduction to precious metals investment.

The Precious Metals Family

Silver and gold are well-known but there is a whole other class of precious metals about which few people know. They are not just curiosities. They are profitable investment targets as well. However, it makes sense to start with the least valuable asset in the precious metal family.

• Silver

Silver is the least valuable precious metal in terms of price per ounce, but you should not hold this low price against it. Low-priced assets often have a lot more upside than their higher-priced counterparts. In silver’s case, its near-term future may include a doubling of its present market value due to some compelling historical evidence.

Silver has been around for a long time. It was known and cherished by people even before something as elementary as writing was invented. Like gold, this metal was and is easily manipulated.

It is malleable, though not so malleable as gold. That allowed people to turn it easily into jewelry. Its ductility, which allows the silver to be drawn out into long wires, would prove to be additionally valuable when electric and electronic applications were discovered for this precious metal.

Silver’s prices are driven by two factors.

Like all other precious metals, silver is a hedge against inflation. As the prices of everything seem to be going up, investors flock to silver to preserve their wealth and maintain a certain purchasing power.

Additionally, silver is in demand for many electronic applications because it is useful in making the most critical connections. Its ductility and its ability to conduct electricity make it a nearly perfect component.

The price of silver has moved forward with incredible speed since 2001. At that time, it was worth just $4 per ounce. Now worth about $30 an ounce, silver has profited many people who were shrewd enough to get in on this investment when it was low.

There is an additional reason to move your money into silver right now.

The price of silver has historically maintained a ratio with the price of gold. Usually, silver is worth anywhere from 5% to 7% of the value of gold. While this ratio has varied throughout the years, silver always seems to gravitate to this percentage range.

At the moment, silver is worth only about 2% of the value of gold per ounce. To regain its historical ratio with the gold rice, silver may acquire two or three times its present value.

• Gold

This is the investment that has brought everyone running into the precious metals market. Gold is an excellent asset into which everyone should invest some of their money. It has solid support behind its price and its present value is not just based on unfounded enthusiasm.

Gold has a certain majesty in peoples’ eyes. It has been treasured since time immemorial. People have used it to adorn their most sacred and important items. It became the first currency and remained the world’s monetary standard for thousands of years. The US dollar itself was tied to the value of this precious metal through the gold standard right up until 1971.

It is the classic hedge against inflation. Decoupling the dollar from gold has only made gold even stronger. Since the government can only print currency but cannot make more gold, the price of an ounce of gold moves irresistibly upward whenever the Federal Reserve injects more money into the economy.

This is not the only thing supporting high gold prices, though. Like silver, gold has many applications in electronics. It is the most capable conductor of electricity and serves as the material that makes sensitive contact points in a variety of devices, including computers and mobile phones.

Since 2001, gold has more than quintupled its value per ounce. While concerns about the fiscal cliff are driving down prices everywhere, few are doubtful of gold’s ability to weather this storm and even thrive on the potential turmoil that the next year may hold for the US economy.