The Beginners’ Guide to Investing in Precious Metals
Since ancient times, precious metals such as gold and silver have spun the gears of economies, creating a baseline for the financial world in which we live today. There is no other form of currency more tried and tested, and savvy investors privy to the benefits of holding gold and precious metals in their portfolios reap considerable rewards.
There is much to unpack about gold and precious metals for a first-time and even longstanding investor. Read on for a host of reasons for adding precious metals to your treasure chest as well as tips for maintaining your assets.
Why Should I Invest in Precious Metals?
Precious metals are a powerful investment source—one that has proven itself for thousands of years. There are many reasons an investor should include precious metals in their investment decisions.
Diversification—Precious metals have very little correlation to stocks and bonds, and a healthy, robust profile is one that is diversified. Precious metals are an effective tool for diversification.
Inflation busters—Rising prices are always a worrisome notion. Inflation whittles away at purchasing power, making everything more costly. Owning gold and other precious metals is a proven way to curb the effects of inflation.
Finite Supply—There isn’t a never-ending store of gold and precious metal deposits. The limited supply of precious metals is one reason they’re regarded as valuable.
Hedges Depreciation—Precious metals can offset dips in currency valuation. When stocks plunge and currencies are devalued, gold and precious metals typically rise in value.
Low Counter-Party Risk—With precious metals, there is no counter-party risk, as they are tangible commodities and not paper assets.
Appreciation—In measuring the performance of gold and precious metals for thousands of years, it is beyond logic to assume that precious metals will appreciate, thereby adding value to one’s portfolio.
Should I Invest in Gold, Silver, Palladium, or Platinum?
Gold has been used as a currency for thousands of years and has been a pinnacle of interest to both ancient and modern investors. Gold is always in demand in industries such as jewellery, aerospace, and electronics, and as a testament to its financial security blanket, with every economic dip, investors flock en masse to gold.
Silver is another physical store of value that is worth much less than gold but is perhaps utilised just as often. Silver is affordable to the average investor and is also in unwavering demand in areas such as computers, automobiles, jewellery, consumer appliances, and even dentistry. It’s inexpensive to buy and sell.
Palladium is an abundant metal more common than gold or platinum that was discovered in the early 1800s. The metal is hard and resistant to corrosion, making it highly sought-after in the automotive and electronic industries. Palladium is cheaper than platinum or gold but more expensive than silver, and the metal has a clean finish and a pleasing chromaticity.
Platinum is one of the rarest metals on the planet, much rarer than gold. It’s aesthetically appealing and is popular in a wide array of industries, including automotive and jewellery due to its durability. Platinum’s price stability has been somewhat volatile but has increased more than five-fold over the last fifty years.
Ultimately, each mentioned metal’s demand is unyielding. Gold’s appeal has stood firm for thousands of years, and newer metals like palladium and platinum are only surging in interest and utilisation. There are benefits to diversifying your investments in all four realms.
Should I Invest in Bullion Bars, Bullion Coins, Rare Coins, or Modern Issues?
Many investors feel stuck before investing in gold and precious metals. Here, we’ll go over the differing investment forms and their specifications.
Bullion Bars: For the Investor and the Gifter
Bullion Bars are the most typical investment forms for precious metals. Gold, silver, and precious metals are melted down and made into unique, individually stamped bars. A common bullion bar will weigh 400 troy oz—the unit of measurement explicitly used for the trading of precious metals (developed in the middle ages and still used today.) The bullion market is the most liquid segment of the precious metals investing area, and there are two different types of bullion bars: cast bars and minted bars.
Cast Bars: The process of casting dates back 6,000 years and modern applications use similar methods as ancient ones. Cast bars are produced by pouring melted gold, silver, platinum, or palladium into a cast which is subsequently cooled and removed from the cast. Cast bars are simple and make visible the brand of the bar, the weight, and the percentage of purity. Each bar is slightly unique as the casting process creates some abnormalities.
Minted bars: Minted bars are essentially casted bars that go through an extra series of steps to produce a cleaner bar or one with particular designs. There are differing methods for minted bars, but the purity of the gold and precious metals is the same as one would obtain with a casted bar. Minted bars are detailed and are typically of a higher value than cast bars because of the finesse in design and aesthetic appeal.
Bullion Coins – For the Investor and the Gifter
A bullion coin is not used for day-to-day commerce. Rather, bullion coins are forged from precious metals and kept as a source of investment. Like bars, bullion coins can come in a variety of different weights, but 1 Troy oz is the most common type of bullion coin traded. Some coins cost more than others purely based on design differentiation.
Visible on bullion coins are their face value and the year of production, as well as the weight and purity. Bullion coins are available in gold, silver, platinum, and palladium, and come with unique designs based on the country it is sold in. For example, Australia is famous for its kangaroo coin, and Canada’s maple leaf can be found on their gold, silver, palladium, and platinum coins.
Cheaper than cast or minted bars, bullion coins are smart investments that also make for exceptional gifts. Bullion coins can also be popular for collectors.
Rare Coins – For the Collector, Gifter, and Investor
Rare coins are unique pieces that make for excellent collectors’ items. Values of rare coins are not solely based on current pricing of precious metals (like bullion bars and bullion coins), rather, rare coins are valued on their exclusivity, mintage (amount of coins produced) and the condition. The condition of the coin, referred to as its grade, is measured against 15 components. While rare coins are not primarily used as an investment, if a rare coin is bought at the right time, it can become a substantial investment.
Modern Issues – For the Collector and the Gifter
Modern issues are for collectors and for those that wish to give gifts. Modern issues are not items that tend to appreciate—they’re legal tender with a face value unlikely to bring about a significant ROI. Modern issues can be purchased as collectors’ items and as keepsakes denoting significant years for you or family members. And although modern issues are not typically a smart investment source, there may be some exceptions.
How Much Should I Invest in Precious Metals?
While there are many benefits to the inclusion of precious metals in investors’ portfolios, there isn’t a clear, definitive percentage on exactly how much each individual should invest in precious metals. Each investor has particular goals or ideas on portfolio diversification as well as different views on current economic standings.
There are portfolio percentages for gold and precious metals all over the map—anywhere from 1 to 20 percent. Each investor will need to weigh inflation, liquidity, volatility, investment timelines, and many more factors. We do, however, highly recommend that bullion bars and coins be a factor in every investor’s portfolio.
Tips For Storing Gold and Precious Metals
Gold and precious metals are not items that should be kept in a shoebox or under the mattress. For security purposes, your assets should be stored in a safe place which only you have access to.
There are many methods of storing gold and precious metals. If you own small amounts, they could be stored in secretive spaces in or around your home—a place where only you would find them. But when it comes to high-value numbers, precious metals should not be kept in the home. The answer here is to transfer your precious metals to a safety deposit box where your assets will be secure and under surveillance.
Precious metal depositories, such as the Perth Mint Depository Program, are another option for premium security. Along with extensive security measures, depositories are climate controlled to mitigate any environmental degradation.
Selling Gold and Precious Metals
When you’re ready to turn your investments gold and precious metals into cash, the process is quick and painless. Simply bring your items into Jaggards, and we’ll pay you the current rate for your items.
Precious Metals – Do’s and Don’ts
X Do not take coins out of plastic capsules - any fingerprints or particles that accumulate on the coin cannot be removed.
X Do not clean coins - this will damage the coin and affects resale value.
X Do not remove minted bars from packaging - even if it's tempting, this can damage the bar and affects resale value.
X Do not be tempted into buying cheap gold – scams are prevalent in every industry. If it looks to be too good to be true, it probably is.
√ Do store your items in a dark, dry place – besides obvious security reasons, this helps maintain colour and condition.
√ Do diversify your portfolio
√ Do invest in precious metals with Jaggards!
Gold and Precious Metal FAQS
What are common measurements for gold and precious metals?
→ 1 troy oz = 31.1 grams
→ 1 regular oz = 28.35 grams
→ 1 kilo = 32.15 troy ounces.
→ 9999 Gold = Pure gold
→ 999 Silver = Pure silver
→ 9995 Platinum/Palladium = Pure Platinum/Palladium
How do you know if the gold or precious metals you have or buy is real?
There are varying tests you can do to evaluate whether or not gold is real, but the most surefire way to confirm authenticity is to take it to a reputable jewellery dealer (such as Jaggards).
Can the government confiscate my gold or precious metals?
If gold and precious metals are recognised as legal tender, governments could have authority to confiscate gold and precious metals. But since gold and precious metals are not legal tender, it is safe to say that this would be an impossible action.
What are other forms of gold you can own?
There are many forms of gold, one being paper gold—essentially a certificate that acts as a substitute for physical gold.
Do you pay GST on precious metals?
Investment grade gold, silver, and platinum bullion is not subject to GST. Referring to investment grade:
- Gold must be 99.5% pure or greater.
- Silver must be 99.9% pure.
- Platinum must be 99% pure.
In this regard, palladium may be subject to GST. Additionally, there may be capital gains tax if investment-grade bullion is sold for a higher price at the time of sale compared to when it was purchased.