An Answer to the Whats and the Whys of Precious Metals
In Irish mythology, every Leprechaun is said to have its own pot of gold that it will guard with its magic and life, but what make these pots of gold so valuable to them? How has gold transformed over the centuries in its utility and function? More importantly, what makes them worth investing in today? Fret not, for all the above questions will be answered in this article.
Firstly, What Are Precious Metals?
Gold, silver and any rare and naturally occurring metal with high economic value are collectively termed as precious metals. These metals were historically used as currency and means for banter and trade, but are presently seen as values for investment and industrial commodities.
Why Invest in Precious Metals?
1. Precious Metals Can Boost Your Portfolio Performance.
According to a research published by the University of Richmond, “Can Precious Metals Make Your Portfolio Shine”, by Assoc Prof (Finance) Mitch Conover amongst other authors, it was discovered that the overall performance of the portfolios that allocate 25% of precious metal equities seen a 1.65% annual improvement compared to those without investments in precious metals. These statistics hold true regardless of the choice of precious metals added, although gold was observed to have the greatest increment.
2. Their Supply and Demand Drive Your Profit Up The Charts.
Like opposing poles of a magnet, precious metals and fiat currencies share an antagonistic relationship when it comes to prices. The Columbia Broadcasting System (CBS) Money Watch notes that the weakening of the dollar is almost always answered with a strengthening of gold and other precious metals.
As resources are finite, the supply of precious metals is limited and therefore, are always in high demand. With competition amongst investors, corporate institutions and national governments seeking to purchase these precious metals, the additional increase in demand naturally results in a higher market price and wider margin of profits.
3. They Are Great Hedges Against Inflation.
When the economy is overheated and inflation hits, the price of commodities tend to reflect inflationary pressures. Demands for commodities such as precious metals rise, leading to a spike in their market prices. However, unlike other commodities, precious metals contain intrinsic value, making them great hedges against inflation.
Conclusion?
Precious Metals are great introductory assets for those looking to dip their toes into the investment market. Although it is not without its risks, it is definitely worth considering as an asset to your investment portfolio.
In this article, we have covered the broad context of why precious metals are esteemed values for investment, but we have yet to tell you how you can invest in one yourself. Interested to find out more? Stay tuned to Part 2 of this article where we dive deeper into the various ways your investment journey in precious metals can begin.
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