Pros and Cons of Investing in Precious Metals

Precious metals, including gold, silver, platinum, palladium and rhodium, are important considerations in any investment portfolio. They are often used as a mode of diversification of investment and like any investment vehicle have advantages and disadvantages. One should always do his/her due diligence when considering investment in precious metals.

Pros of investing in precious metals

Precious metals have intrinsic value in all parts of the world and aren’t dependently linked to fiat (printed) money.

Some precious metals such as silver, rhodium and palladium have industrial uses and are always in demand.

Gold, the oldest form of currency, is increasing in popularity among developing nations such as China and India.

There is a finite amount of precious metal on this earth, and though these metals are constantly being mined, there is a limiting cap. Unlike many governments of the world that print more money unchecked, metal investments can only be diluted by the total finite amount of metal on earth.

Coins and bars made of precious metals are simply beautiful. Who wouldn’t want a coin with Miss Liberty on it over an electronic stock share?

Many coins made of precious metals have numismatic (collector) value in addition to the intrinsic metal value.

Huge earnings potential. Often it is said of precious metals that the sky is the limit.

Cons of investing in precious metals

Physical ownership of precious metals may be difficult. Where does one safely store a stack of heavy metal?

Precious metals are becoming more difficult to find and are often purchased at a premium. There is often a lag between downward movement of spot price of a certain metal and the downward adjustment of the physical metal itself.

Premiums for purchases of small amounts are often high. While buying in bulk offers discounts on price, bulk purchases are not always possible for the first-time investor.

Shipping costs of physical precious metal can be staggering.

If one decides to have their metals stored in a secure facility there will often be guardianship or management fees which can erode the investment potential.

Precious metals have been confiscated by governments in the past (including the United States during the 1930’s), and may be subject to confiscation again in the future.

Volatility. Precious metals prices often move independently and in larger variance. Metals may be more volatile than other stable investments.

Pros and cons must always be weighed when considering any investment. If the potential reward outweighs the identified risk, then precious metals may be right for you.