Precious metals are thought to be good options to diversify your investment portfolio. Though the most common precious metals for investors are gold and silver, there are other commodities available for your selection.
But are they good investments for the year 2022? It really depends on the type of metal you choose. Some experts are expecting the price of gold to continue moving upwards, though at a slow pace in the next five years. This is despite the price drop in mid-2021 when silver outperformed gold due to industrial demand.
Before deciding if you should invest in precious metals, you should first have a deeper understanding of the commodities available, what the benefits are, and how they’ll perform in the global economy before making your decision.
What Is Considered Precious Metal?
Precious metals, as the name suggests, are elements that are considered rare, which gives them a high economic value. These metals are commonly used in industrial processes and jewelry. Historically, precious metals were used as currency, but now, they’re known more as an investment. There are four main types of precious metals used for investment:
Gold is considered to be the grandfather of precious metals. This metal is regarded for its durability and ability to conduct both heat and electricity. While we know gold to be used primarily in the jewelry industry, it’s also commonly used in electronics and industrial applications.
The price of gold is not affected purely by supply and demand. Since gold is such a popular investment option, investors tend to hoard it. When they decide to sell their gold, which usually happens in bulk, the price of gold will drop.
The market for silver is known to be more volatile than gold. This is because of its perceived role and value in both the industrial and jewelry market. Silver is viewed to be more common and easily available than gold, which leads to fluctuating supply and demand, resulting in inconsistent pricing.
Platinum is sometimes regarded as more valuable than gold. This isn’t because of the actual value of the metal, but because of the fluctuating price. Platinum is traded around the clock in the global market and can sometimes fetch a higher price than gold in certain periods.
Palladium is the lesser-known metal compared to the three and has the most industrial use. It’s used in various manufacturing processes, particularly for the electronics, medicine, and chemical industries. The largest use for palladium is in catalytic converters due to its ability to serve as an effective catalyst for speeding up chemical reactions.
What Are the Main Benefits of Investing in Precious Metals?
There are many benefits of investing in precious metals. Not only is it a popular investment option, but it’s also considered safe when compared to other investments, like fiat currency, giving you protection against inflation. Other benefits include:
1. It’s A Tangible Asset
Unlike cryptocurrency or other similar investments, precious metals are tangible. Like real estate investment, if you decide to purchase any precious metal, it becomes an asset that belongs to you. You can decide to store it safely in a locked safe or offsite as a portion of your individual retirement account (IRA).
2. It’s A Timeless Asset
Precious metals, particularly gold and silver, have been treasured by us for thousands of years, and it’s here to stay regardless of the market price. Its role in various industries will ensure these metals will continue trading in the global market for a long time to come.
3. It’s Easy to Liquidate
Unlike certain investments, like real estate, precious metals are easy to liquidate if you need to. Whether the global economy is good or bad, you’ll still be able to sell or buy these metals. There are always buyers who will be interested to purchase no matter the price.
How Can You Invest in Precious Metals?
There is more than one way for you to start investing in precious metals. Here are some of your options:
Commodity Exchange Traded Funds (ETFs)
ETFs are available for the three main precious metals, except for palladium. This option will provide you with the convenience of buying and selling but will not give you access to the physical asset. This means you will not receive the gold bar or silver coin.
Stocks and Mutual Funds
This may not be an option unless you are aware of how mining stocks are valued and operated. If you’re still interested in this option, it’s suggested that you work with a fund manager who’s well versed in the area of precious metal mining.
This option is great if you have a place to put your gold bars and silver coins. Some investors find this to be troublesome, while others find relief in knowing exactly where their investment is sitting.
Will Gold Be Popular In 2022?
Gold will always be a popular choice of investment no matter the year. The price of gold has dropped in 2021, but there are mixed views about whether the commodity will be bullish in 2022. Experts attribute the fall to the rising strength of the dollar and other currencies.
As the economy continues to heal from the pandemic, the dollar and other currencies are expected to continue improving. Unfortunately, this has led to the price drop for precious metals, including gold. Some experts are predicting that prices of gold will jump to $3,000 per ounce in 2022.
What About Silver?
The price of silver bars is expected to rise in 2022, making it a good investment choice for that year. Experts predict that silver will take time to recover from the currency economy, but can expect to see an increase in price up to $28.52 per ounce by the end of 2022.
Are precious metals still a good investment? If you’re looking to diversify your portfolio with something that is tangible and has a long history of tracked performance, precious metals are your answers.
Despite the fluctuating economy and prices, precious metals, specifically gold and silver will always be a haven for investors. It’s also known that owning just a small percentage of metal in your portfolio can greatly reduce volatility.
Precious metals will continue to be a good investment option for 2022. Just like any other investments, the trick to ensuring you’re making the right choice is to do your research and understand your financial capability.
Are you interested to find out how you can start investing in precious metals? Contact us today and let us help you.