ما هي المعادن الثمينة؟ What are precious metals?

Precious metals are named for their rarity and high economic value. They provide investors a means to store wealth and seek growth in value.

Definition and Examples of Precious Metals

Precious metals such as gold and silver have long been used as a means of storing and exchanging value. They have also been used either for minting government coins or backing the value of a government’s currency.

Today, precious metals, which form part of the commodity category, are primarily used as a means for investors to diversify their portfolios away from stocks, bonds, cash, and other assets, partly because they do not follow stock or bond market movements.

Historically, these metals have been a way for investors to seek growth during periods of inflation and safety during times of economic uncertainty. Of course, precious metals are also bought for industrial uses and commercial purposes, such as making jewelry.

How to Invest in Precious Metals

There are many ways to purchase precious metals, including buying coins or weights of gold or silver. This is often done through a financial institution or another broker, although it is possible to buy gold and silver coins and palladium and platinum directly from the U.S. Mint or other government mints. The cost of converting precious metal into currency is likely to be added to the price. Additionally, ownership of precious metals often comes with storage costs (i.e., a safe deposit box) and insurance costs.

Investors can also gain exposure to precious metals through mutual funds or exchange-traded funds (ETFs). These funds buy precious metals on behalf of their shareholders, or invest in securities of companies involved in the production of gold or other precious metals. There are funds that focus on one precious metal and funds that invest in a range of precious metals. As with any mutual fund or exchange-traded fund, there will be a fund management fee with precious metals funds.

Another way to invest in precious metals is through futures contracts for a specific metal or futures contracts for publicly owned companies involved in exploring or producing precious metals. A futures contract is an agreement to buy or sell a publicly traded asset at a future date. The contract specifies when the seller will deliver the asset and what the price will be. Remember that commodity prices are volatile, and trading futures is generally considered a high-risk endeavor not suitable for novice investors – or even for many experienced investors.

Advantages and Disadvantages of Investing in Precious Metals

Advantages

• A means to diversify a portfolio
• Preservation of intrinsic value
• Protection against inflation
• Numerous options for how to invest in them

Disadvantages

• High taxes
• Does not generate cash flow during ownership
• Price volatility
• Additional costs, including transaction fees, shipping, storage, and insurance

What Precious Metals Mean for Investors

Investing in precious metals is a way to diversify a portfolio that is primarily made up of stocks and bonds. However, the investor must be aware of the many ways to add precious metals to their portfolio, the additional costs associated with these options, and the long-term performance trends of the metals or related investments they are considering. Don’t forget that slow or no growth in value can also be a risk in itself.

Key Takeaways

• Precious metals, most traded of which are gold and silver, are assets that tend to protect against inflation or uncertain economic times.
• There are many ways to add precious metals to a portfolio, including purchasing physical metals (gold, silver, palladium), buying mutual funds or ETFs that hold precious metals, investing in mining or manufacturing companies of precious metals, or using futures contracts to invest in them.
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• Although precious metals tend to retain their value over time, their price can be volatile.
• It is important to be aware of any fees or additional costs associated with investing in precious metals.

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Sources:

IRS. “Topic No. 409 Capital Gains and Losses.” Accessed Dec. 29, 2021.

Source: https://www.thebalancemoney.com/what-are-precious-metals-5214371

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