Why Do People Invest In Precious Metals?
Precious metals are rare to find, thereby making them precious in the world. They come with various degrees of value, depending on their rarity and the demand for them.
However, many people shy away from investing in precious metals due to lack of knowledge. With a good understanding of precious metals, this can become one of your investment options.
In this insight, we will be sharing four reasons people invest in precious metals.
1. To diversify an investment portfolio
Seasoned investors will always advise that you should not invest in only one area, but in several areas that allows you to split your risks.
Precious metals could be an ideal investment option for you as the demand for precious metals are relatively stable. There are many industries that rely on precious metals, such as the manufacturing industry and jewellery industry. A good example is gold that has always been in demand and its value has been relatively stable over the years.
2. Precious metals have intrinsic value
Intrinsic value is the perceived value of an asset, be it stock, real estate, or a commodity like precious metals.
As precious metals are widely accepted and traded, this means that the trading market for precious metals is big and very much available. As precious metals are always in demand, they are likely to remain tradable and have intrinsic value.
Precious metals also retain their value well as they are not perishable and easily identified. Hence, you can keep a bar of gold for decades and it is likely to retain most of its value. This is also the reason why there are multiple countries holding large gold reserves as insurance against hyperinflation and major economic crises. The United States has the world’s largest gold reserve, holding over 8,000 tonnes of gold!
3. To hedge against inflation
Inflation is an overall increase in the prices of goods and services over a period of time, resulting in a unit of currency being able to purchase less as compared to before. In short, when inflation happens, the purchasing power of a currency decreases.
The value of one’s investment has to keep up with inflation over the years. In this regard, the purchasing power of precious metals is stable, thus acting as a good hedge against inflation.
4. To hedge against financial crises
A financial crisis takes place when there is a sudden significant loss in the value of financial assets. Other scenarios such as a crash in the stock market or a currency crisis could also be classified as a financial crisis.
This is why other forms of investment ventures such as stocks can be hugely affected by financial crises. On the other hand, precious metals are unlikely to lose their value due to them having intrinsic value as mentioned previously.
Taken your first step into investing in precious metals? The next step would be to keep them in a safe place. Find out more about Ultra Vault’s Gold and Silver Storage services in the following locations:
