Costs
Owning physical precious metals comes with several costs, typically over ten percent of the value, and even more for jewelry. A cost-effective way to invest in precious metals is through gold exchange-traded funds (ETFs), which are traded on the stock exchange. The Federal Reserve has been cautious about raising interest rates due to slow economic growth, while the Bank of Japan has adopted a negative interest rate policy to combat deflation. These factors can make buying actual gold less appealing.
However, owning gold is still considered a smart investment both in the short and long term due to its transparency and proximity to real gold prices. To invest in these funds, you need a special account and a stockbroker. Storage costs are another consideration when owning physical metals. Depending on the amount of gold you have, you might need to rent a safety deposit box or a vault because it’s a highly sought-after commodity.
Ensure the gold you buy is genuine since pawn shops often offer low returns on precious metals, and factor in the cost of insurance to protect your investment in case of loss or theft. Unlike futures contracts, which require higher premiums and involve the physical delivery of metal, investing directly in actual metals is safer. Despite being an attractive option for investors, precious metals may not be the best choice for everyone.
Reliability
There are several reasons to have physical bullion. It’s one of the oldest forms of currency and has maintained its value over time due to its scarcity, durability, and resistance to corrosion. Its price often moves in opposition to the U.S. dollar, providing financial security. Owning bullion also shields you from market fluctuations, which might pressure you into selling at an unfavorable time.
Storage
There are various options to store your bullion. Some facilities charge storage fees based on the average daily value or by the gram. The Royal Canadian Mint in Canada, APMEX in the UK, and Loomis International in Switzerland are popular storage locations, all insured and regularly audited. Generally, storage fees should not exceed five percent of the bullion’s value.
Many people prefer to keep their bullion on their premises, or they can opt for a bank’s safe deposit box, which incurs a monthly fee. However, using a safety deposit box might require a re-assayed gold bar. Segregated storage vaults are available, but they can be costly. To save on these expenses, consider getting a storage unit. When choosing a storage facility, consider how much you are willing to spend on insurance.
Safe deposit boxes often come with a minimum insurance amount, but vaults, which are more expensive, provide a convenient option for storing larger amounts of bullion. The benefits of vaults can often outweigh the costs, despite being prohibitive for some investors.
Alternatives
With bullion prices hovering around $1,350 per ounce, investors are exploring alternatives to physical bullion. Metals like silver, platinum, and palladium serve as viable options due to their industrial applications, although platinum and palladium tend to be costly, they offer protection against inflation. Rare earth metals are gaining popularity as well. Diversifying your portfolio can mitigate the risk of a bullion price crash.
Another option is purchasing shares of bullion ETFs, which are more liquid and involve less risk than actual gold, though they may carry higher fees. For advice on which option suits you best, consult a financial advisor. Be cautious of scams, which are prevalent, and ensure your transactions are safe. Gold stocks offer another route, providing statements of ownership stored digitally, offering greater liquidity than physical bullion. However, keep an eye on bullion prices and wait for an opportune moment to sell.
