For beginning precious metal investors, one of the most difficult choices is deciding which metal to invest in. Each metal has its own unique market and investment characteristics, making it hard to choose exactly which metal is best. Further complicating matters is the fact that precious metal bullion comes in several different forms.
Here’s a brief guide to the different types of precious metal investments that will help you make the right decisions for your personal investment portfolio.
A long-standing favorite of precious metals investors, gold has been used as a store of value for thousands of years. Gold is known as an investment that tends to hold its value well during economic slowdowns, and which can ride out major recessions quite well. Gold is also an excellent hedge during periods of high inflation compared to cash investments. While gold is a great investment, the cost of buying significant quantities of gold can be a bit prohibitive for some newer investors.
Read more: Geology of Gold
Silver is a close runner-up to gold in terms of its popularity as a precious metal investment. Silver has the huge advantage of being relatively inexpensive compared to gold, making it easier to get started with a small amount of money and build a portfolio from scratch by making smaller investments periodically over time. Silver's widespread use for industrial purposes, including in the fast-growing solar energy sector, also provides support for the metal's price.
Despite its advantages, silver’s lower price compared to other precious metals can present a storage challenge. With an ounce of gold, platinum, or palladium being worth many times more than an ounce of silver, the storage space required for any sum of value in silver will be much larger than that required of the other precious metals.
Read more: Geology of Silver
Platinum, used widely in vehicular catalytic converters and for jewelry, isn't quite as major an investment metal as gold or silver. Nevertheless, this metal can be a good investment. Historically, its price has been above that of gold, though gold has outperformed platinum in recent years.
Platinum's main advantage is the fact that, because it isn't a major investment metal, it isn't subject to the same spikes going into down markets that silver and gold are vulnerable to. Instead, its price tends to be more stable across different market conditions.
Read more: Geology of Platinum
The characteristics of palladium, and market for this metal, are more or less similar to those of platinum. Palladium is also used in automotive manufacturing, though less commonly in jewelry than platinum. Generally, the prices of these two metals track each other quite closely. Even though platinum and palladium are very similar, the latter is often used by precious metals investors to add an extra layer of diversification to their portfolios.
Read more: Geology of Palladium
The market for copper is diverse, boasting a large number of industrial, manufacturing, and decorative uses. The demand for copper is ever-increasing and it, like other precious metals, is in limited supply. Although copper is often overlooked as an investment compared to gold and silver, an increasing number of investors are starting to buy copper bullion coins and bars to hedge their portfolios against further currency devaluation.
Read more: Geology of Copper
Other lesser known noble metals found on Earth include:
Types of Bullion Investments
In addition to choosing which metal you want to invest in, you’ll also need to decide what form you want your metal to come in. There are several different options, but the main three stores of precious metals are rounds, bars, and coins.
When it comes to flexibility as an investment medium, bars are the clear winner among precious metals investments. The advantage of metal bars is they’re made in many different weights and sizes. Because of gold's high prices, gold bars start at as little as one gram. Silver bars typically start at a single ounce. For investors who want to quickly add large amounts of bullion to their portfolios, bars are a great option too. Bars in the upper weight ranges can weigh up to one kilogram or more. Of course, these high-weight bars are quite expensive, but they're the best way to build a large precious metal portfolio quickly.
Gold and silver coins can make very good investments because they have some unique characteristics of their own. Unlike rounds or bars, bullion coins can carry a certain amount of collector value. Newer gold and silver coins, like Canadian Maple Leaf coins, don't typically have much collector value. American gold coins minted prior to the elimination of circulating gold in 1933, on the other hand, can have more than half of their total price tied up in their value as collectibles. If you wish to invest in coins, it's important to understand that there may be more to your investment than straightforward bullion value.
Rounds are popular with new investors because they tend to be relatively easy to invest in. Most rounds are made of silver or copper, but you can find a few gold rounds on the market as well. Rounds typically weigh between one and five troy ounces, making them reasonably flexible when it comes to choosing the amount of metal you want to buy at any one time. Most rounds also have beautiful designs on them, which makes investing in precious metals just a bit more enjoyable than it already is.
Which One Should You Buy?
The truth is, nobody can tell you which precious metal you should buy—not even us. Just as with any other class of assets, a portfolio of precious metals is best secured when diversified. For beginners, silver or gold may be the best place to start. Once you have at least some of each in your portfolio, many investors start integrating lesser-known metals like platinum, palladium, or copper. By diversifying with precious metals, you can make your asset portfolio less risky.