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Investing in Precious Metals: A Primer

For thousands of years, gold and silver have been admired and considered valuable. More recently, other metals like platinum have been added to the list.

The value of these metals tends to increase over time, so it’s usually a good idea to include precious metals in your portfolio, but how? Which ones should you buy and how should you invest in them?

Read on to learn more about precious metals and your options for investing in them. There are several ways to invest in platinum, gold, and silver.


Gold is easily the precious metal with the most trading activity. The laws of actual supply and demand do not largely affect the price of gold. There’s a lot of gold above ground that’s simply being hoarded, for lack of a better term. When these investors and hoarders get the urge to sell, the price drops.

When they feel like buying, the relatively small new supply is used up and the prices are driven higher. The price is largely a function of emotion or sentiment.

Factors that increase the desire to own gold:

  • Global financial concerns. When the population largely considers banks to be unstable, gold is frequently used to store wealth.

  • Inflation. Gold has history of maintaining its value during inflationary times. When inflation is increasing, it can be a good time to invest in precious metals.

  • War and political issues. These issues have also increased the amount of gold hoarding. An entire life’s savings can be made into a very small and portable form.


Silver has much greater industrial use than gold, so its price is a function of both its current desirability as a means to store wealth and its use in industry. Because of this, the price of silver fluctuates more than the price of gold.

Silver is used in batteries, microcircuits, superconductors, and more. At one time, the photography industry used a lot of silver, but digital cameras have almost completely eliminated that demand.


Platinum is much rarer than gold or silver, so it tends to cost more than either, but this isn’t always true. Like silver, platinum is used in industry. The main use is in automobile catalytic converters. Because of this, the auto industry largely determines the price of platinum through the level of auto sales and production.

Platinum is the most volatile of the precious metals.

Options for Investing

  1. ETFs. Exchange traded funds offer a very simple way to invest in precious metals without have to store the metals yourself. You can think of ETFs like mutual funds that own and invest in precious metals.

  2. Mutual Funds and stocks. There are plenty of options here, the most common being mining operations. The price of mining shares tends to move with the price of the corresponding precious metal.

  3. Futures and options. If you want to make big bets on precious metals, this is the ticket. These derivative products offer the opportunity for big profits and big losses.

  4. Bullion. This includes coins and bars. You’ll need a safe place to store it, but if you’re expecting the worst, this is the best option. However, coins and bars aren’t as liquid as the other options.

  5. Certificates. These provide all the benefits of bullion without having to store it. But don’t expect to trade your gold certificates for anything of value if there’s a global economic disaster.

Precious metals are worth consideration for every investor. They offer excellent protection against inflation. They also have a very low – and even negative – correlation to many other investments like stocks and bonds.

Even a small investment in precious metals can reduce the volatility and risk in your portfolio. Look into precious metal investing and see if it makes sense for you.

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