Investing in precious metals is a very common thing to do. However, for a majority of times people investing in these precious metals are suspicious of the gains they might make. This is because they are expensive. So instead they just choose to keep track of things like gold rate Mumbai or Chennai and wait for the moment when they’d be comfortable investing that kind of cash. Well now you don’t have to because we are going to show what are the benefits and pitfalls of investing in these precious metals. So here we have made a list of pros and cons of investing in precious metals so that you can see for yourself whether you should invest in precious metals or not.
Pros of investing in precious metals
- Diversification purposes
Consider investing in precious metals if you want to diversify your investment portfolio. This is because it has been observed that during times when the stock market is down, many investors resort to putting their money on other investment vehicles such as commodities like gold and silver. By doing so, they lessen their financial risks while they wait for the market to improve its performance again over time.
In general, you can buy and sell precious metals easily because it has global markets which provide liquidity. This means that if you want to cash out on your investment, it won’t be difficult for you to do so unlike other less liquid assets like property or artworks. You can also sell them privately if you don’t want to deal with dealers or brokers. The bottom line is that the liquidity of precious metals is high because they have lots of buyers and sellers at any given time. For instance if you own gold all you need to do is look up today’s gold rate in Vijayawada or whichever city you are in and then sell you will always be able to find a buyer.
- Currency hedge
Investing in precious metals can also help protect you from currency fluctuations, which may cause your investment to lose value over time. By having a diverse portfolio that includes precious metals, you can help shield yourself from inflation risks associated with currency fluctuations. Currency inflation affects the value of financial assets such as stocks, bonds, and bank savings negatively. But when investing in gold or silver, inflation doesn’t have any impact on its intrinsic value. Therefore, it acts as a hedge against inflation, protecting the wealth of investors from getting eroded.
Cons of investing in precious metals
Now for the downsides, investing in precious metals is said to be volatile in nature because the prices of gold and silver tend to fluctuate wildly over time. So, it can be difficult to predict when their prices will increase or decrease. For instance, you might think that their prices will go down more in the coming months but they might actually go up instead. Because of this unpredictability, it’s vital that you keep a close watch on the prices and the factors that affect them.
- The Storage Problem
If you choose to buy and store physical gold or silver, you need to find a place to store them where they are: out of harm’s way; protected from theft; not susceptible to damage or deterioration. A bank safety deposit box is one such place but then it can be costly and inconvenient.
- High investment
The high investment cost is the main disadvantage of investing in precious metals. When you buy gold or silver, they often cost more than their actual market value. That’s because you’ll need to pay a commission to the dealer, aside from possible shipping and insurance fees. The commission you’ll pay can vary, depending on the dealer and current market conditions.
If you need to buy coins, your local coin shop is a better choice than an online dealer because you can save a lot of money. Most brick-and-mortar shops also have smaller inventories, so you might not be able to find the type of precious metal you want to invest in. But some people prefer to buy from local dealers because they can negotiate for better prices and inspect the metal before paying for it.