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While gold, silver and platinum often appeal to investors due their symbolic, traditional and innate values, invest...
While gold, silver and platinum often appeal to investors due their symbolic, traditional and innate values, investing in precious metals is not as straightforward as you might think. Although precious metals offer more stability and “true value” than currencies, there are some important differences between each metal as well as common advantages and disadvantages for investment.
All precious metals provide some portfolio diversification in small amounts. Though by far the most popular for investment, gold actually has less true value than silver or platinum, which are used widely in industry (though gold also has some industrial applications).
The difference is that the price of gold is based more on investors’ sentiment than on supply and demand. While all precious metals offer a more solid alternative to currency in times of inflation, they are also generally considered volatile investments. When the stock market is up, precious metals go down and visa versa.
Buying physical precious metals: prices are above market value; storage and transport; accessibility; poor liquidity; tax*
Coins: often worth more than the precious metal they are made of; they have historical value; less tied to market prices*
Jewellery (antique or famous designer): can be good investments, but most jewellery is worth less than its weight in gold
Precious metals futures: similar to buying stocks, it’s high risk and requires knowledge of the market
Mutual funds or ETFs (Exchange Traded Funds) for precious metals: a certificate rather than a physical object; good liquidity; less expensive; diverse
Buying stock in mining firms: high risk/reward; more ethical issues
*In the US, the IRS taxes gold and collectables at a higher rate*
Gold: unstable due to fluctuating popularity/consumer demand, ethical issues
Silver: large demand for silver in Eastern emerging market economies for medical products, electrical appliances, etc.; cheaper and more stable than gold; more ethical due to low energy intensity
Platinum: most volatile; most expensive; both a luxury and industrial metal (automotive industry); energy-intensive
*Fair trade and fairly mined gold, platinum and silver jewellery exist
Investing in gold mining, funds and futures and, to some extent, all gold means that you are driving the rush to extract it. The gold mining industry is linked to the destruction of the Peruvian Amazon, child deaths from lead poisoning in Nigeria, exploitative wages in South Africa, government oppression and human rights violations against local people in Romania and Greece, and pollution – arsenic, cyanide and especially mercury poisoning – in several other countries like Panama, Honduras and Indonesia.
Keep an eye out for ethical gold and platinum ventures as well as fair trade jewellery. Recycled precious metals are by nature the most ethical, as well as the most practical. Though silver is never disposed of and has always been recycled, it is mostly a by-product of gold, copper, lead and zinc mining.