The Benefits of Owning Physical Metals
When people think of buying gold, silver and other precious metals, they usually think of huge bricks that are stored in a vault somewhere. While this is one way to own physical metals, there are actually many other ways. You don’t have to take delivery of precious metals. Make no mistake about it, only physical metals confer the key benefits of outweighing mining companies that deal with these precious metals or ETFs. Keep the following benefits in mind if you are thinking of investing in these metals’ physical form.
Pure gold or silver clay instead of “diluted effect”
As mentioned above, there are many ways of investing in precious metals. You can buy gold bullion, gold coins, or shares of companies that buy gold stocks or ETFs. However, the problem with buying less “pure” versions is the pricing discrepancies that may hinder you from truly getting the maximum value of your investment. Take gold coins for instance. Its price has actually a lot more to do with its collector value than its physical gold component. While the gold content of a coin does play a role in boosting its price, the bulk of its appreciated value is in its collector’s appeal. If you bought a very limited collection gold coin, its value will go up higher than a particularly popular gold coin that has a huge collector base. In other words, there is as a lot of other pricing mechanisms that come into play when it comes to coins. The same goes with mining companies dealing with gold and silver. While this is definitely a way of playing the precious metals market, it is an indirect way. Why? You are not dealing with the actual physical metal. Instead, you’re dealing with companies that dig physical metals from the earth. As a result, you are basically investing in the overall health of these companies. Just like with any other stock investment, it can go up and down with other external factors. Therefore, one of the greatest benefits of owning physical metals is that you get a direct pricing. You know exactly how much your physical metal is worth by multiplying the amount of silver and gold into the amount of units that you have. After taking off assays and other small fees, you are left with a profit or a loss. This transparency and clarity is one of the key advantages of owning physical metals.
Admittedly, you can get an inflation hedge when you invest in gold or silver coins. However, the amount of hedging you get is clearer when you own physical metals. As mentioned above, the appreciation is more transparent. You know exactly how much your investment is worth and how much it protected you from inflation. This is not exactly the case when you’re dealing with collectors’ items that are made out gold, silver or platinum for that matter. If your main goal in getting into gold and silver is to protect your hard-earned money against the effects of inflation, it is a better idea to invest in its physical form. The good news about it is that it doesn’t have to involve you taking the actual delivery of gold and silver bars in your home. Who wants to run the risk of being robbed or create crime and safety issues? There are accredited and ensured storage facilities for these precious metals that are available in major cities in the United States.
Currency devaluation protection
Make no mistake about it. Just because you live in the United States does not necessarily mean that you are safe from currency devaluation. In fact, this is exactly what the US did after the crash of 2008 according to some financial analysts. The US Federal reserve started flooding the global market with cheap dollars by buying US debt in issuing paper money. The more paper money there is in the global circulation, the lower the price of the existing US dollars. It is no surprise that the US dollar crashed against the Euro and Yen due to this devaluation approach. Therefore, one of the best the benefits of owning physical metals is being protected from currency devaluation. While the amount of dollars in circulation increases, the amount of dollars that it takes to buy that particular metal increases as well. This way, regardless of how badly the dollar does in terms of exchange rates, the value of your physical metals is protected. This one of the key benefits of owning physical metals.
Protection against economic crisis
The US stock market goes to several periods of bull-and-bear runs. In a bull market, the price of stocks keep going up. With a lot of speculations, the market is driven primarily by greed. Investors think that even if they buy at high prices, somebody else would still be stupid enough to buy at an even higher price. This can only go on for so long. The bear market, on the other hand, works in the reverse assumption. This market players would continue to sell short hoping that the price of the stock will continue to crash. They make money when they sell short because they borrow at a high price and buy it back at a lower price and then keep the difference. One of the key advantages of owning physical metals is that their value go up when there is a general economic uncertainty.
Very liquid compared to other investments
You can’t get more liquid than physical metals. With gold coins, you have to get them appraised, hold auctions and hope that the collectors’ market would find value in your collection and then buy it at a price that you want. One of the most easily recognizable benefits of owning physical metals is that you only need to know the current bid-and-ask price for gold, silver or platinum to retrieve your physical gold and then sell it. It’s very straightforward. It’s easy to get in and get out. This liquidity is one of the reasons owning physical metals is very popular in many parts of the world. In fact, in many developing countries, it is more preferred than holding paper cash.