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Investing in the Precious Metals Market 5.00/5 (100.00%) 4 votes

The precious metals market holds the reputation of being a go-to market in terms of holding their value and gaining in value; especially during slow or even bad economic times. Gold, silver, platinum and palladium are the most commonly traded metals in the market. As with any other product, supply and demand drives value and price indicators in the precious metals market. These materials find varied uses in jewelry, coins and even car manufacturing materials.

Supply and demand also affects how each type of precious metal performs in the market. For example, platinum is the most expensive metal in the market but market demand determines its price from cycle to cycle. Silver and palladium prices are also limited by market demand. Gold, on the other hand, is always in high demand so it’s priced and valued accordingly.

A precious metal is typically defined by its rarity. Production levels determine how available or unavailable a particular type of metal will be. Not surprisingly, the more “unavailable” a metal is the higher its value. So, new ore discoveries in silver can ultimately drive the price and value of silver down, whereas metals like gold and platinum are scarce. Scarce means the world’s metal supply is finite, which makes it rare and precious. This scarcity accounts for the high values placed on gold and platinum metals.

Investing in Precious Metals
The recession of 2008 put everything in perspective in terms of the actual “paper” value of America’s money system. Based on a fiat model of currency, the dollar has the government’s approval as legal tender but holds no real value or backing. For this reason, the year 2008 saw record numbers of new investors in the precious metals market according to the Forex Empire news site.

Much like copper and coffee, precious metals are traded as commodities on the market. Precious metals are also sold on the stock market as stocks and shares in the companies that mine them. This leaves the curious investor with a range of options to choose from within the precious metals market. When compared to real estate, investment accounts, bonds and other types of stock, the precious metals market offers a very real and value-laden security not to be found with most investment options.

Another aspect of investing in precious metals is the market’s overall accessibility. While some people may view precious metals investing in terms of gold bars or bullion shares, the actual range of prices available in the market make it possible to get started with a small initial investment.

The buying and selling of gold coins is one of the most common forms of market trading. Gold investment grade coins are available in various sizes ranging from an ounce to a tenth of an ounce as are silver coins, which are considerably less expensive than gold. This wide range of price options opens up the precious metals market to both the middle class and working class investor as well as the wealthy.

Rare Coins
Many people collect rare coins –also known as ancient coins- as a hobby, though these coins can also make for a sound investment option. Coins from ancient civilizations, such as Rome, Greece and Mesopotamia are known to hold their value in spite of market conditions. With a limited supply and high demand, these coins hold their value easily and may show considerable increases in value over time. Overall, rare coins make for a fairly predictable investment that carries a low risk.

In terms of rarity, the Sheldon Rarity scale considers a coin to be rare if no more than 75 are currently in existence. Because this market sees an ever-diminishing supply, average yearly price increases can range as high as 10 percent, according to Investor Insight. As rare coin investing has become an international market, considerable gains can be made at the upper end of the market or the more expensive pieces.

The trick to investing in rare coins is having a sound knowledge of what to look for and actual market values. Unlike other precious metals, rare coin investing is an unregulated market that’s highly speculative and constantly in flux. Coin dealers, trade shows and auctions are possible sources for finding rare coins. Once purchased, considerable profits can only be made over time as the value of the coin increases.

Precious Metals ETFs
ETFs or exchange-traded funds are similar to mutual funds in structure, but differ in how they’re traded on the market. ETFs allow for day-to-day buying and selling unlike mutual funds, which require a long-term holding period before selling. Precious metals ETFs are based on the commodity trade of precious metals. As exchange-traded funds, they hold their value simply because of the inherent value that precious metals carry. This means, changing dollar values can have little to no effect on them.
precious metal market
It’s not uncommon for the Federal Reserve to print new money as a way to stimulate the economy. In the process, the value of the dollar decreases accordingly. This has become common practice since the 2008 recession, which means new investors may want to seek out investments that can create a hedge against declining dollar values. In effect, metals like gold, platinum, silver and palladium increase in value as the value of the dollar declines.

With each metal type carrying its own value and price levels, it can be hard to determine which type of ETF fund will see the greatest gains. Fortunately, there are some exchange-traded funds that combine two or more different types of precious metals. These funds allow for diversification, which helps to spread the risk and ensure your initial investment remains intact. Once again, researching and getting to know the different types of fund packages available can go a long way towards reducing risk in the long term.

Precious Metals Mutual Funds
Mutual funds offer yet another avenue for investing in precious metals. Just like with any other type of fund, precious metals mutual funds automatically incorporate a range of different metal stocks, so diversification is already built-in. Compared to ETFs, fund managers play a more active role in the actual selection of stocks that go into a mutual fund. The careful investor may want to make a point to find out a little bit about the companies behind the stocks and the types of metals included. As the high market demands for gold and silver continue, this translates into high returns for mutual funds made up gold and silver stocks.

The same value benefits found in precious metals affect the value returns and low risks found in these mutual funds. There are, however some drawbacks to mutual fund investing in general. Since fund managers handle these investments, a range of maintenance fees and costs are associated with this type of investment. On top of this, many of these funds charge fees and penalties for cashing out early, which can really eat into profit earnings. Someone who intends to let this investment sit for a long period of time may find precious metal mutual funds a good investment option. As with any mutual fund investment, the key and pivotal factor has more to do with the stock’s ability to hold its value regardless of market conditions.

Bad Economy vs. Good Economy
Attempts to stabilize a slow or bad economy are known for their destabilizing effects on the value of the dollar. In addition to printing new money, central banks are known to employ “zero interest rate policies,” according to the Forex Empire news site. Of course, the whole point of charging interest is to recover the full value of money amounts loaned out over time. When zero interest rates policies are in place, this is typically a clear indicator that dollar values are in bad shape.

With the American dollar being a world standard as far as currency goes, a declining dollar value triggers even lower currency standards in other countries. Since precious metals are known to hold their value at all times, this type of market investment works well in both national and international markets.

A good or thriving economy is where precious metals really shine. With consumers spending more, the demand for gold metals in particular rise as well. With gold being a finite material, an increase in demand for a diminishing supply only helps to increase the value of gold in a strong economy. Interestingly enough, the same increase in value occurs during a slow economy as people gravitate towards investments that are known to hold their value.

The Monex Deposit Company
While precious metals make for a wise investment option, the type of company an investor works with can greatly determine how well their investment does. A company with industry experience and multiple contacts develops its own built-in leverage as a source within the precious metals market. The Monex Deposit Company got its start in the precious metals business in 1967 as one of the very first gold dealers in the market. Over the years, its developed a clientele made up of 80 percent repeat clients with 25 percent of their new clients referred by word of mouth.

The Monex Deposit Company offers a diverse range of investment options for precious metals, some of which include –
• Gold coins
• Gold, silver, platinum and palladium, delivered to the customer
• Storage accounts for purchased metals
• Atlas investment accounts that pay out at a four-to-one ratio

Monex.com provides a wide range of options for all levels of investing, from gold and silver coins to bullion bars so anyone can take advantage of the security and earnings available through the precious metals market.

 
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