Investing in Precious Metals: A Guide for Beginners

Why do people invest in precious metals?

There are many reasons behind the enduring appeal of physical gold and silver over other types of assets, including:

• Precious metals are a tangible asset

Real physical gold and silver can be seen, touched, and held in your hand, unlike other assets like stocks and digital currency.

Precious metals cannot be erased or wiped away, unlike digital assets such as computerised bank accounts or cryptocurrency, and an online hacker cannot erase a gold sovereign coin from existence - it will continue to remain in your portfolio. Unable to be destroyed by fire or water, gold and silver coins and bars do not take any upkeep or maintenance, they can simply be stored until the day they are needed.

• Gold and silver are real money

The oldest form of currency in the world, it has long been said that physical gold and silver are the ultimate form of money.

Precious metals cannot be created out of thin air like digital and paper money - gold and silver are limited resources that are instantly recognised and traded across the world. Every country speaks the language of gold and silver, and although their prices may fluctuate, their value remains timeless. Paper money may devalue over time, especially in times of economic instability, yet when other markets struggle, precious metals often have the amazing ability to hold and even appreciate in value.

• Precious metals are practical

Gold and silver are incredibly practical when it comes to both buying and selling. Both metals are available as coins and bars in a variety of sizes, and gold and silver can be easily stored and/or broken down to use as and when required. Gold and silver bars and coins can be sold virtually anywhere in the world, due to their instantly recognisable store of value. Gold and silver can not only be sold almost instantly in this modern age, but, unlike other assets, little knowledge about these precious metals is also required to buy them, making them increasingly desirable.

• There is increasing demand for gold and silver

Global demand for both gold and silver has been growing around the world for some years. India is currently one of the largest gold consumers in the world thanks to their love for jewellery, particularly during wedding season, and China has high demand for gold due to gold bars being a traditional form of saving and gift-giving. Demand for silver is also growing due to its use in many major industries such as medicine and electronics.

Global demand for precious metals is also growing for investment purposes, as many are now seeing that gold or silver can be a positive addition to a portfolio in order to protect their financial future in these unstable times. However, gold and silver are not a finite resource. When it comes to gold and silver, sooner or later demand meets supply - and eventually, it may not quite match up.

• Precious metals can offer protection

Gold and silver are often used to protect future wealth. In a world of economic uncertainty and mounting global debt, precious metals are often regarded as a safe haven, offering many advantages that other investments cannot.

In times of global financial or political instability, precious metal prices tend to climb, and, as the cost of living tends to rise, we see gold and silver used as a hedge against inflation. And when world tensions are heightened, people flee to the safety of gold and silver as they often outperform other investments. For example, the summer of 2020 saw gold prices soar to record breaking heights due to the fallout from the Covid-19 pandemic crisis.

Physical gold and silver bullion can provide ultimate control over wealth, and can also be a way to preserve wealth for the future, often passed on from one generation to the next.

Types of precious metals

Gold and silver have been recognised as precious, valuable metals for thousands of years. However, they are still have their place in a modern, digital world and are as popular today as they have ever been.

Gold

Gold is one of the most well-known and sought-after precious metals in the world, with its unique properties and practicality ensuring its popularity. Historically, gold has been used as a form of currency, a symbol of wealth, and for ornamental purposes, for thousands of years.

Gold has many uses today due to its malleable nature, durability, and resistance to corrosion, and is commonly used in coinage, bullion, and jewellery making. Its conductivity also makes it valuable in the manufacturing of electronics where it is often used in components such as connectors and circuit boards.

Investors are drawn to gold due to its perceived stability and is often used as a hedge against economic uncertainty. The price of gold can fluctuate based on a variety of factors including supply and demand, geopolitical tensions, interest rates, and currency movements. As such, gold is often seen as a safe haven asset during times of market volatility.

Understanding the factors that influence the price of gold can be essential for those looking to enter the precious metals market. Keeping up-to-date with global economic developments and geopolitical events can often provide an insight into potential movements in the price of gold, allowing individuals to make informed decisions.

Silver

Silver, like gold, holds a significant place among precious metals and it has a range of uses ranging from industrial to investment. Historically, silver has been used in coinage, jewellery, and decorative arts, due to its lustrous appearance and relative abundance in comparison to gold.

Today, silver's conductivity and reflectivity make it extremely useful in a wide variety of industries, including electronics, solar energy, and photography. It also has antibacterial properties, meaning it is useful for medical instruments and water purification systems.

Those interested in precious metals often turn to silver for its affordability compared to gold. Similar to gold, the price of silver can be influenced by a range of factors such as supply and demand, economic conditions, and geopolitical tensions.

Understanding the factors that can influence the price of silver is crucial in order to navigate the market effectively. Keeping an eye on supply and demand, along with economic indicators, can make it easier to gain an insight into potential movements in the price of silver.

What are the risks of investing in precious metals?

The precious metals market can have certain risks alongside potential benefits. One of these risks can involve the volatility of the price of gold or silver, which is often influenced by various factors like economic conditions and geopolitical tensions. These fluctuations can sometimes lead to unpredictable short-term price movements.

Precious metals do not generate any income like traditional assets such as stocks or bonds, and holding physical gold and silver can sometimes incur storage and insurance costs, particularly with larger quantities.

To navigate these risks, it's important to stay informed about market trends and economic developments in order to make informed decisions, and to adopt a strategy. Some individuals find their exposure to risk can be reduced by the diversification of their portfolio, spreading it across a variety of assets. Others decide to consistently purchase a fixed cost amount of precious metals over time, helping to lessen the impact of the volatility of the price of precious metals.

It is also advisable to regard your precious metals portfolio as a long term commitment, rather than a short term one. This can help to potentially ride out short-term market volatility and capitalise on the historical trend of precious metals appreciating over the long term.

Start your precious metal investing journey

As you venture into the realm of precious metals, it's essential to understand what makes them appealing and the details of how they work. Gold and silver are tangible assets with enduring value, thanks to their historical significance and practicality.

These metals often serve as a safe haven in an ever-changing economic landscape, a refuge from market volatility and uncertainty. Their intrinsic properties, including durability, conductivity, and scarcity, highlight their appeal and enduring demand.

At Atkinsons Bullion & Coins, we stand ready to support you on your journey into precious metals, offering a diverse range of products, including gold bars, silver bars, gold coins, silver coins, and a large range of pre-owned products. Whether you're looking to diversify your portfolio, protect your wealth, or preserve value for future generations, we are here to provide the expertise and information you need to navigate the world of precious metals with confidence.