A Simple Guide to Buying Precious Metals
Published on 15th September, 2023
Precious metals have been considered valuable investments, symbols of prosperity, mediums of exchange, and a reliable store of value throughout history. They also have a wide range of industrial applications – from electronics to automobiles. Owing to their rarity, inherent value, and low correlation to inflation, precious metals are among the best investments you can make to preserve and grow your wealth in the long term.
With numerous dealers and various processes worldwide, it’s necessary to understand how to buy physical precious metals globally and the different considerations when doing so. This article aims to provide you with a simple understanding of how to go about adding physical precious metals to your portfolio and the general understanding of the precious metals market as well.
Gold & Silver: Portfolio Safe Havens
Gold’s usefulness as a diversification asset, long-term store of value, and performance in times of crisis constantly rank near the top of the list of reasons why official sector institutions has gold as a part of their portfolio.
During times of political and economic upheaval, investors flock to dependable assets like gold, driving up the value. In other words, while down markets wreak havoc on some assets, they’re precisely when gold shines as an investment
On the other hand, silver has been a valuable commodity for centuries, prized for its beauty, durability, and versatility. It has been used in coins, jewelry, and various industrial applications such as electronics, medicine, and photography. However, in recent years, new demand areas for silver have emerged driven by advances in technology and changes in consumer behavior.
Silver is currently largely used in the areas of renewable energy such as solar and wind power. It is one of the fastest-growing demand areas for silver. Silver is an essential component of photovoltaic solar panels. As the demand for solar panels increases, so does the demand for silver as part of one’s portfolio.
A Surge in Demand for Platinum
The projected platinum shortage is poised to be more severe than initially thought due to heightened demand, primarily driven by increased industrial sector requirements, as reported by the World Platinum Investment Council (WPIC).
Industrial demand, particularly in chemical and glass production in China, is looking to be the strongest on record. Strong demand also continues in the auto sector as platinum becomes an increasingly common replacement in catalytic converters.
Palladium Market Set for Growth
The global palladium market has experienced consistent growth in recent years and is expected to continue on this upward trajectory. Noteworthy trends within the palladium market include a rising preference for sustainable and environmentally-friendly products.
As a result, there is a trend towards greater technology integration to improve product quality and efficiency through the use of palladium.. Innovative technologies such as artificial intelligence, machine learning, and blockchain are being harnessed to create cutting-edge products that surpass traditional options in terms of both effectiveness and efficiency.S
Why Precious Metals are a Good Investment for You
Diversification: Precious metals act as a hedge against traditional investments like stocks and bonds. When the value of paper assets declines due to economic or geopolitical factors, precious metals can often retain their value or increase in value. This diversification can help reduce overall portfolio risk and volatility.
Inflation Hedge: Precious metals – gold and silver in particular – have historically served as a hedge against inflation. When the purchasing power of fiat currencies erodes due to inflation, the value of precious metals tends to rise. Investors often turn to gold and silver as a way to preserve their wealth, as seen in the current high-interest and inflationary environment, gold and silver are providing stable returns to investors.
Liquidity: Gold and silver bullion are highly liquid assets. This liquidity can make it easier for you to convert your precious metals holdings into cash when needed. At J. Rotbart & Co., we assist clients with efficient liquidation of their holdings at competitive rates globally.
Tangible Assets: Unlike some other investments like stocks or bonds, gold and silver bullion are tangible assets. Since you physically possess these metals, it can provide you with a sense of security, especially during times of economic uncertainty.
Safe-Haven Asset + Stable Returns: During times of economic turmoil or geopolitical instability, investors often flock to gold and silver as safe-haven assets. This increased demand can drive up the prices of these metals, potentially providing gains for investors. On average, gold price provides returns of about 10% annually.
Long-Term Store of Value: Gold and silver have maintained their value over centuries. It is why they still remain an attractive option for investors who are looking to preserve their wealth for future generations.
No Counterparty Risk: When you own physical bullion, you do not have to worry about counterparty risk, which is the risk of a third party failing to meet their obligations. This is a concern in some other forms of investment, like derivatives or certain types of bonds.
Factors to Consider While Buying Precious Metals
Finding a dealer for all your needs: With innumerous reviews and testimonials, J. Rotbart & Co. offers clients access worldwide with their global network, competitive fees and capability to personalize solutions that best fit your needs! With numerous gold dealers worldwide, it’s always necessary to do your research to find the most suitable gold dealer for your needs. They can be found through Google or by word-to-mouth or by researching online. Nonetheless, checking reviews and testimonials is beneficial.
With countless reviews and testimonials, J. Rotbart & Co. offers clients access worldwide with their global network, competitive fees and capability to personalize solutions that best fit your needs!
What metals to purchase?: Gold & silver are the most popular precious metals for investment. Whilst Silver price is more volatile than gold price, it is often seen as a more affordable investment option.
Platinum and Palladium are more volatile and largely dependent on the gap between their supply and demand.
What forms of goods you want to purchase?: Metal purchases can be made in coins/bars. Coins are the most popular way to invest in gold for retail clients whereas bars are a more cost-effective option and therefore are preferred by larger buyers. Popular brands of coins include the American Eagle/Buffalo, Royal Britannia, South African Krugerrand and Canadian Maple Leaf. Gold and silver bars are also available in various weights such as 1 ozt, 100g and 1 kg for gold and 100 ozt, 1 kg and Large Good Delivery (~30 kg) for silver.
Although Platinum/Palladium products and their supply have been constrained due to the geopolitical condition in Russia/Ukraine (large suppliers), the 1 kg bars and lower denominated products are still of popular preference for various investors.
Once you own the physical precious metals, here are a few other items you should consider:
Precious Metals Allocation: Many clients choose to diversify their metal purchases, most popular being 80% gold and 20% silver for their initial purchases. Some dealers may have special offers on certain products and have an attractive package.
Liquidity: Make sure the bars and coins you buy are of LBMA* (leading authority around precious metals) brands such as Heraeus, PAMP etc. LBMA-backed brands offer best liquidity globally.
*LBMA – The London Bullion Market Association (LBMA) is an international trade association, representing the global market for gold and silver bullion which has a global client base. This includes the majority of the gold-holding central banks, private sector investors, mining companies, producers, refiners and fabricators.
Secure Storage: Many prefer to store their gold in a secure storage facility where their metals are kept under state-of-the-art security measures and full liability coverage. This offers a peace of mind to clients knowing their wealth is safe. At J. Rotbart & Co., we offer secure storage in over 12 countries worldwide and with various benefits including: complimentary annual audits and vault visits etc.
Buyback Option: Ensure your dealer has a buyback option to buy back the precious metals they sell you as well as any precious metal holdings you might already have.
One-Stop services: Make sure the dealer offers full precious metals services. At J. Rotbart & Co., we are a one-stop shop providing clients a white-glove service from storage, international shipping, loans against metals etc. – ensuring your needs and requirements are met with efficiency and quality service.
Payment Methods: Global dealers may not have comprehensive payment options so it is important to make sure the dealer has your preferred payment method such as bank transfers/cryptocurrency payments/credit card payments/unionpay etc.
J. Rotbart & Co.’s Simple Process
- Clients provide their budget and preferred metals + allocation
- We prepare a personalized solution adhered to the client
- The order form is sent to the client
- The client signs order form and settles payment
- The prices are locked for the metals and delivery is arranged to respective storage locations/delivery addresses
- Trade documents are provided to clients for their reference
Here Are Some Factors That Can Impact Precious Metal Prices
Economic Conditions: The state of the global economy has a profound impact on precious metal prices. During economic downturns or periods of uncertainty, investors often turn to gold and silver as safe-haven assets, driving up demand and prices.
Inflation: Precious metals, especially gold and silver, are often used as a hedge against inflation. When the value of fiat currencies erodes due to rising inflation, the relative value of precious metals tends to increase, driving up their prices
Interest Rates: The relationship between interest rates and precious metal prices is complex. Generally, when interest rates are low, the opportunity cost of holding non-interest-bearing assets like gold is low, making precious metals more attractive. Based on this, rising interest rates can make interest-bearing assets like bonds more appealing, potentially reducing demand for precious metals. However, metals-backed loans can provide opportunities to make the most of your metals investment whilst enjoying additional capital to employ in external investments.
U.S. Dollar strength: The prices of precious metals are often inversely correlated with the US dollar. When the dollar weakens relative to other currencies, precious metal prices tend to rise because it takes more dollars to purchase the same amount of metals.
Geopolitical Events: Political instability, conflicts, and geopolitical tensions can lead to increased demand for precious metals as safe-haven assets. News of such events can cause short-term price spikes.
Central Bank Policies: Central banks, especially those with significant gold reserves, can influence gold prices through their buying or selling activities. Changes in central bank policies related to gold reserves can impact the market.
Industrial Demand: Silver, in particular, has significant industrial applications, such as in electronics and solar panels. Industrial demand can influence the price of silver, especially during periods of economic growth.
Jewelry and retail Demand: Precious metals, especially gold, have a long history of use in jewelry. Changes in consumer preferences for jewelry and retail demand can impact prices.
J. Rotbart & Co. offers a one-stop-solution for all your precious metal needs. From financing precious metals purchases to buying, selling, assaying, storing, and transporting precious metals, we offer the widest range of services possible to our customers. We bring uncompromised quality, transparency, and expertise to the table and can provide unique and customized solutions for your precious metals needs
To find out how you can get started, fill out our online contact form and schedule a free consultation with one of our precious metals experts today!
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