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Analytics, 25 November 2022

Investing In Precious Metals

This year has been rocky for financial markets, with record high inflation and rising interest rates seeing most of global equities in the negative zone year-to-date. One of the best ways to protect your wealth in a volatile market is to invest in precious metals. Diversification is the key to mitigating risk – and in tumultuous times like these, gold bullion is your secret weapon.

This is also true for large banks and central banks, who find precious metals, and majorly gold, as a favourable store of value due to its lack of credit risk, its unrivalled liquidity and its stellar long-term performance. They also know it’s a brilliant diversification trump card. Research suggests close to 400 tonnes of gold were added to central bank reserves in Quarter Three and their gold holdings are currently worth just over US$2 trillion.

Why investing in precious metals?

Protection against inflation

In case of decreasing value in currency, the value of gold, silver, and other metals will automatically rise to compensate for their original value. This ensures that the value, at the time of purchase, is not diminished by inflation thus protecting the investor’s wealth.

High-level liquidity and easy purchase

The higher the degree of trading activity the higher the liquidity rate of any given precious metal. Most metals have high demand at all times with no seasonal negative fluctuations. This means that every investor can get cash for goods at their own convenience with no hustle.

Liquidity of course goes hand in hand with ease of purchase in that, just as it is easy to liquidate so is it to buy. The ease of purchase is assisted by investment companies that give a hand to investors in terms of purchase and choice in precious metal.

Intrinsic value

The intrinsic value of any amount of any precious metal depends on the current spot price. This simply means that the current price of the smallest unit at any given time is the basis of value calculation for any given metal. This will ensure that unlike currency the value is not affected by outside factors.

No credit risk

With precious metals, credit risk is not an issue, if anything, these metals act as a guard against credit risk in a volatile market. While other investment and wealth store options will always depend on other factors precious metals will adhere to no such rule instead depeadinging fully on their own value.

Diversity to portfolio

With the right amount of knowledge, precious metals such as gold will help mitigate risk. Additionally, the investor gets ‘street wise’ on the best time to trade in or buy more metals. The involved and recomended investment companies, help with the gaining of such knowledge for beginners.

Investing in precious metals

There are several ways to invest in precious metals. From ETFs, to mutual funds, to buying physical metals like gold or through a precious metals IRA. below is a summary of a few ways in which you can invest into precious metals.


An individual retirement account (IRA) is a long-term savings account that individuals with earned income can use to save for the future and enjoy certain tax advantages. The IRA is designed primarily for self-employed people who do not have access to workplace retirement accounts such as a 401(k), which is available only through employers.

You can own precious metals, like for example gold, in traditional gold IRAs, Roth gold IRA or a Simplified Employee Pension (SEP) gold IRA that are tax-advantaged and structured like their standard counterparts. However, for investments in the US, the IRS mandates that your precious metal is stored through an IRS-approved custodian who can arrange for your gold to be stored in a depository.

Precious metals IRA investments are typically available through precious metal companies that assist you in opening your self-directed IRA account. The company also helps you select a custodian who purchases gold on your behalf. Goldco, Birch Gold Group and Augusta Precious Metals are a few gold IRA companies commonly used by investors.


One of the easiest ways to invest in precious metals is to invest in metals exchange-traded funds (ETFs), which essentially trade like regular stocks. You can buy and sell ETFs through your stock brokerage. The ETF provider typically holds physical precious metals like gold or silver bullion, and the value of those precious metals gets reflected in the ETF’s share price.

The ETF provider typically charges a small annual fee to manage the fund. Gold ETFs are generally in the ballpark of 0.20-0.40% of assets, with silver ETF fees typically being slightly higher.

Mutual funds

Like ETFs, precious metals mutual funds offer you access to a piece of the precious metal market with a fund that invests in the precious metal or owns shares in companies producing a specific metal. For example, gold mutual funds may be more affordable and diverse than individual stocks. Another benefit is that you don’t have to research the mining companies you invest in; the fund’s manager will do that for you.

Like gold ETFs, gold mutual funds are available through a brokerage. Before investing, review the fund’s overall performance, yearly returns and asset allocation. Investing in gold mutual funds may be more cost-effective than owning physical gold bars or coins.

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