Precious metals, a safe haven for savings
Financial investments always involve risks, but if we want to make our savings profitable without disassociating ourselves from investments, precious metals, considered safe-haven assets, are a good low-risk option. We explain why they can be a good investment alternative in times of crisis.
Investments are driven by a set of economic and political forces that come together to determine their profitability. As a general rule, the more potentially profitable an investment is, the higher the implicit risk involved. Even so, in a global economic environment marked by uncertainty, it is to be expected that some investors will consider protecting their capital by purchasing safe-haven assets such as precious metals.
In the face of rising inflation, precious metals, such as gold, offer unique inflation protection based on their intrinsic value, which does not carry credit risk and cannot be inflated. This is true as long as we are talking about buying ‘physical gold’, but this is not the case if we buy ‘paper gold’, through investment funds, or other forms, in dollars, euros, or any other currency that can be affected by inflation.
That said, a significant investment in gold, or any other physical precious metal, can be too costly because of transaction and storage costs, so investment funds with derivatives or shares in mining companies may in practice be more convenient and versatile in diversifying our investment portfolio.
Which precious metal to invest in?
The currency system of fixed exchange rates linked to gold broke down in 1971 with the end of the Bretton Woods Agreements. However, gold remains the ultimate safe-haven asset and an unparalleled store of value that has a tendency to rise in value when there is market uncertainty.
Silver is a much more common metal than gold and worth up to 100 times less than its golden brother, making it more affordable and easier to buy and sell. Its volatility is higher, but much more stable than currencies, stocks, or bonds, and it is also considered a safe-haven asset in case of economic crisis.
Like silver, palladium and platinum are considered industrial metals, in this case especially for the automotive industry in the form of catalysts, or in industrial processes and electronics. Still, these are metals that are not as easy to underwrite and often require large inputs and more financial expertise.
Physical metal or through financial products?
Just as acquiring a valuable object or an antique is an uncomplicated and affordable purchase for anyone willing to make a small investment, gold and silver are equally accessible in physical form. However, it is important to buy from an establishment that has the London Bullion Market Association (LBMA) stamp, which allows individuals to buy and sell gold and silver with a minimum set of guarantees.
If we opt for an investment fund or ETF, we must bear in mind that we will not have possession of the precious metal, which means it loses much of its intrinsic value, and that it is an investment model that provides more versatility, but depends upon basic stock market knowledge that requires professional intermediaries in the sector.
Although precious metals represent a useful and effective way to diversify our savings and investments, and can help us to obtain liquidity in case of need, it is crucial to assess the risk we are willing to take and clearly define our investment objectives before jumping in.
If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price the safe-haven asset par excellence: physical gold.
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