Introduction To Precious Metals
Before you start investing in gold and silver, you should get to know this special type of investment and find out what it’s all about. You should be aware of the benefits attached to it-there are plenty of them-and also know about the risks and challenges, too.
This guide will show you why these precious metals are a good investment for beginners when it comes to making solid, long term investments. We will talk a little about how the markets are doing today, as well as what to look for before you begin investing in this type of currency.
How to Begin?
Focus your attention on gold and silver stocks and be sure to focus on pure gold or silver companies. You will want to look up various mining companies, and research them in-depth, forward and backward as you decide which one suits you. For these mining companies, higher prices for these precious metals will guarantee them higher profit. Increased profits therefore offset their costs.
Use caution when looking because not all mining companies have the same solid future. Some companies will do very well, while others will not-so be sure to know the different types of gold and silver miners. Here are the types:
Senior Mining Companies-Companies such as Goldcorp, Franco Nevada, Barrick Gold-these are safe bets for investments.
Mid-Tier Mining Companies-Smaller in scale but good potential in terms returns. This is because of the profits they attain. Some good examples are Endeavour Silver, New Gold, or First Majestic Silver.
Junior/Startup Mining Companies-These ones are new to the business, and so their risk is high, expenses are high, and need for resources is huge. It would be your job as the investor to find out which ones would create value for the economy.
Alternatively you can own physical gold and silver by buying from bullion dealers directly. There are many reputable bullion dealers selling gold/ silver bars and coins. Many people prefer to own physical metal as they feel more secure having it right in their hands, with easy access to it.
Gold & Silver: Wealth Insurance
You may be wondering about the benefits of gold and silver as far as an investment choice. We will now discuss a few reasons as to why gold and silver is a great choice. It is an attractive investing option for a big number of reasons, and popular metals include silver, gold, palladium, and platinum. Gold is a durable metal that keeps its appeal as markets go back and forth on silver. Silver works as a store of value as well as a metal that has tangible uses in industry.
For starters, silver is what some call a “miracle metal” just because in world rating, it is the second most useful resource after oil. It is used in a huge number of products that you know about, like computers, mobile devices, digital cameras, iPhones, and so on. Silver is preferred by newcomers because it is lower in price and easier to get started with.
History has shown us that for more than 5,000 years gold is the only form of currency that has survived. It has never failed. During periods of challenge and uncertainty, it has always been the safest option for investment that has the greatest wealth-increasing potential.
Good investors learn from the past. They review previous crises and learn from them. They have seen how volatile our market can be. To protect their hard-earned retirement savings against such economic uncertainty, they invested precious metal investments as one solution. A retirement plan that is backed by precious metals comes from options like traditional IRA, Roth IRA, and more.
Gold and silver are also independent from government.
If paper money fails, gold and silver will not. For government to print new paper currency, the government would have to devalue the currencies that lead to inflation as well as the risk of hyperinflation. When it comes to gold and silver, however, the government has no power because they are not created and dependent upon government. It is also advantageous that investors can own and buy gold and silver anonymously.
Another advantage is that the current political climate and market demand suggests that government will return back to currencies that are supported by gold, which will cause the value of gold to increase.
Another great thing you can do with your gold-plated jewelry is make a profit. Investing in precious metals fosters profit and brings together a specific consumer group. If you start a gold sales business, it is different than any other type of business. It is a good idea to have a good, solid foundation of knowledge on how the market works before you begin trying to sell gold jewelry.
Fiat Currency, Inflation, Quantitative Easing
Fiat money is a currency that a government has declared to be legal tender, but it is not backed by a real, tangible physical commodity. The value of fiat money is determined from the relationship existing between supply and demand, rather than the value of the paper and other materials from which the currency is made.
This type of money only has value because the government says so. Fiat money was originally introduced as an alternative to money backed by commodities.
This brings up another point of concern among investors and those interested in economics. Because fiat money is not connected to physical reserves, it runs the risk of becoming worth nothing due to hyperinflation. Governments can print as much new money as they would like, devaluing the money that is already in circulation. A good example of hyperinflation in action is the current state of Venezuela.
If people lose faith in a country’s paper money-such as the United States Dollar, the money will not hold value any longer. This is much different from gold, which, historically speaking, has been used in many applications from jewelry to industry to decoration.
Ergo, fiat money has no intrinsic value. Changes in citizens’ confidence in a government that issues fiat money can make a currency worthless. Commodity money, on the other hand, like gold or silver, retains its value based upon the metal used to make it, or other materials contained within. Fiat money, on the other hand, is at risk of inflation and deflation as it is not intrinsic in value.
Commodity money has intrinsic value but does run the risk of large price fluctuation based upon changing prices of the commodity. For instance, if silver coins are used, a huge discovery of silver could make the value decrease significantly.
And how does quantitative easing play into all this? For starters, let’s understand what quantitative easing means. This is a monetary policy that central banks use to boost the economy when their standard monetary policy is no longer effective. In essence, the central banks print up money as a means of stimulating the economy.
However, this does little for the value of fiat currency. This happens every time the banks issue bonds to commercial banking institutions or investment funds. The US did this during the years of 2008, 2010 and 2012 to lessen the blow of the 2008 recession. This, at first, does bring about a rise in demand, lifting gross domestic product (GDP) and the economy from a halted state. But if this is done in excess, it can have serious repercussions on the economy’s health.
It may be easier if we look at it from an observer’s perspective. The US uses Quantitative Easing as a means of getting the country out of a recession. But even though the intentions are good, it does not help the economy-it just makes it worse in the long run. It is only good for a small group that control the central banks, AKA the Federal Reserve. It’s scary because these people control money and how it is created, therefore controlling the masses.
The Markets Look Scary…So Invest Accordingly!
Investments like bonds, real estate, and the stock market can and will go down from time to time. People then flock to precious metals because these investments have a tendency to increase in value, even during times of worry and turmoil. Investing during times of certainty means that you can really turn a profit when investment prices go up.
Political crises, wars, and other upsets within the world cause investors to seek the stability that gold brings. Tangible metals like these are attractive because they are valuable items that you can keep right in your own home for an even greater sense of security. It is important to have a portfolio that is well diversified-and a great way to do this is by having precious metals, stocks, bonds and cash.
Some may wonder why gold even matters considering that it no longer backs the US Dollar or other worldwide currencies. The easy answer is that while the metal is no longer the forefront of our everyday transactions, it is still very critical in the global economy.
Look to the balance sheets of central banks and other large financial organizations-they hold a whole fifth of the world’s supply of gold above ground. Several central banks have added to their supply of present gold reserves, which indicate concern over the long-term world economy.
Another thing for you to remember is that gold preserves your wealth. Gold’s importance in the economy of today revolves around the fact that it has done a great job of preserving wealth over thousands of generations. This cannot be said about paper currencies.
One good example is that in the early 1970s, one ounce of gold was equivalent to $35. Suppose at that time you had a choice of hanging onto that gold or keeping your $35. They would buy you the same things-a new suit, for instance.
However, if you had an ounce of gold in today’s society and converted it to today’s money, you could definitely still buy yourself a nice skirt suit or business suit-but the same cannot be said for your $35. If you had held your money, you would have seen that the US Dollar had degraded due to inflation, whereas gold increased in value as time went on.
Gold also makes a nice hedge, or method of protecting oneself against loss on an investment. Gold preserves wealth, and this is more important in an economy where investors are against a declining US Dollar, and ever-rising inflation.
But with rising inflation, we find that gold appreciates in value. When investors see that their money is losing its value, they begin putting investments into a hard asset that maintains value.
The reason that gold actually benefits from a US Dollar that is declining is because gold is priced in US Dollars around the globe. The reason for this is that investors who look to buy gold must sell their US Dollars to make this transaction work. This in turn drives down the value of the US Dollar as worldwide investors seek to diversify the dollar.
The second reason is that a weak dollar makes gold less expensive for investors who have other currencies. The result is greater demand from those investors who hold currencies that have gone up in value-or appreciated-in relation to the US Dollar.
Gold is also a great way to diversify one’s portfolio. One common piece of investing advice is to never put all your eggs into one basket-that is, create a portfolio that is built upon different types of investments like ETFs, gold, silver, real estate, cash, and more.
Gold has historically been an investment that can add a great bit of diversity to your portfolio. No matter your worries: whether you are concerned about inflation, a devalued US Dollar, or even keeping your wealth intact, it is clear that gold is a great way to go.
Gold can be a fantastic way to get your portfolio into a great place of diversification and value. It has historically only gone up in value over the years, providing a safe haven against inflation. You can invest in coins, bars, bullion, and jewelry, among other methods.
The advice upon this investment strategy are the same as any others-do your research and if unsure, seek help from an expert so you make a smart choice for your present and your future.