When it comes to precious metal investments, the first thing most investors think of is gold. In fact, many experts regard gold as a “safe haven” in uncertain times and are particularly sought after when fear of inflation increases. But you can’t just invest in gold as a precious metal. Meanwhile, silver, platinum, palladium and rhodium are also popular precious metals, which are often in the slipstream of gold. We show how you can invest in precious metals, which precious metals are suitable and on which factors the performance depends.
However, there are now alternatives to traditional physical investments. With securities, investors can include various precious metals in their portfolios.
ETCs (Exchange Traded Commodities) related to precious metals
These are exchange-traded certificates, the performance of which is linked to certain raw material prices. As a rule, they emulate the spot price. Precious metal ETCs are an alternative to the physical acquisition of precious metals, but they also involve risks. As with all certificates, losses up to total loss can also be achieved with ETCs.
Precious metal stocks
Investors can now also find shares in companies that are involved in precious metal mining or trading in precious metals. However, the corresponding stocks do not have to develop in the same way as the precious metal and their prices can fluctuate more. This creates a serious risk for investors.
Investment funds with precious metal stocks and precious metal ETFs in their portfolio
Investors can now also find numerous active and passive funds related to precious metals. Funds follow the principle of risk diversification and invest in a large number of precious metal-oriented stocks or track corresponding indices. Active funds, on the other hand, try to outperform their benchmark, while passive ETFs limit themselves to replicating them as precisely as possible. However, precious metal ETFs that track pure precious metal prices are not permitted in the EU. Even with active and passive funds related to precious metals, investors must expect losses due to the volatility.
CFDs and other derivatives with precious metals as an underlying
Contracts for Difference (CFDs) are highly speculative instruments that react sensitively to small price changes and are used by experts in trading. There are also several other derivatives for precious metal speculators such as warrants, certificates with a leverage effect or other speculative constructs. However, such instruments are not suitable for long-term investments and are highly risky.
What should you watch out for in precious metal investments?
Unlike interest-bearing investments or stocks, pure precious metal investments do not offer any ongoing income. The return lives solely from the price developments. Precious metals can offer a possible stable value and the possible “real” value retention, especially in the long term, but there is no guarantee for this.
Precious metal investments are above all a “risky and speculative investment”. Speculating on certain price developments is a real risk – not only because prices fluctuate sharply, but also because they are associated with a high degree of forecast uncertainty. Even proven experts are often wrong when making predictions about the performance of precious metals.