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The Case for Investing in Precious Metals

Section: Economy

Over the last five years, many people have lost their jobs and their homes, and all of us have lost confidence in a financial system that once seemed as steady as a rock. Even with recent signs of recovery, the economy still has most people feeling timid about trusting it any time soon. We still need to put our money somewhere, though. Letting any surplus sit in savings opens it up to inflation and missed opportunities. Keep reading to learn why investing in precious metals is a fantastic solution to both problems.

Investing in Precious Metals
In some ways, the act of investing in precious metals is similar to more traditional investments. You buy a certain amount of whichever precious metals you like and then you hold onto them as you hope to see their value rise. If, at any point, you decide their value has climaxed, you can sell your holdings for a profit.

Investing in precious metals can take the form of buying physical amounts, as with bullion or rare coins. However, you can also choose to purchase the metals through exchange traded funds, which are very similar to actual shares. Others choose to benefit from precious metals by investing in the mining companies that harvest them.

A Hedge Against Inflation
There are many reasons to invest in precious metals. As I mentioned earlier, money that isn’t invested can suffer the ill effects of inflation. However, putting that money in traditional stocks won’t necessarily save them, either.

Time and time again, precious metals have proven a valuable hedge against inflation. That’s because they have what’s known as innate value. This means precious metals are always valuable simply because of their natural properties. Silver is better than all other metals at conducting electricity, for example. It will always maintain this property and there’s nothing the market can do about it. Currency, on the other hand, has what’s known as fiat value. This simply means it’s only as valuable as the government backing it. When that government begins pumping more currency into the market, the value of the currency drops.

Another term for this phenomenon is inflation. Historically, inflation is great for those investing in precious metals because their value grows. People don’t feel confident keeping their savings in dollars if the dollar keeps falling. As companies can suffer just as much from inflation, the smart move is often to turn to precious metals as a sort of safe haven.

Future Applications
Historically, precious metals have been valuable because they are lustrous, malleable and resist corrosion. This made them ideal for jewelry and other forms of ornamentation. While precious metals are still great for this purpose, they’re used for far more than decoration these days.

Palladium is essential for making catalytic converters, for example. Platinum is also used for reducing pollution, though it’s just as important for a number of other chemical reactions, even some that create gasoline. Gold, thanks to its ability to reflect electromagnetic radiation, can be found on satellites orbiting the planet, and silver is necessary for solar panels. As time goes on, you can be confident that more and more uses will be found for precious metals. With each newfound application, the value of that metal will grow.

2014 will be an interesting year for precious metals. For a number of reasons, many think their prices will actually suffer. However, for those who study precious metals, no economic factors will keep them from the market. In fact, as prices drop, many investors will see an opportunity to grow their position. So long as there is always a use for silver, platinum, palladium, and gold, there’s a strong argument for investing in precious metals.