Investing in precious metals, such as gold and silver, is an alternative to make your savings profitable. Both are considered “safe haven” assets to fall back on in a tough economic period, such as when an economic downturn hits. As with other investments, capital gains will be increased based on the evolution of the price of the financial product.
It is possible to invest indirectly in the gold or silver market through related companies. That is, you can buy shares of companies dedicated to mining. “Although it is not a direct investment in gold, the value of the shares will be strongly correlated and at the same time, what will happen in the gold extraction mines will also have a direct impact on its value,” explains Raisin.
Exchange-traded funds (ETFs) or financial products may also be used. Derivative products are financial instruments whose value derives from the evolution of the prices of another asset, called the “underlying asset”. However, the CNMV, the financial regulator, warns of “the possible peculiarities and specific risks that may arise in each case.”
Influence of the world economy
But another option is to invest directly in gold and silver by buying it basically through bullion or coins. Specifically, it will be necessary to resort to certified entities with a guarantee of the weight and quality of the gold ingot they offer. The price of these bars or coins directly reflects the evolution of the market and will indirectly be seen in the financial products that follow gold or silver.
Despite the fact that there may be some compensation between both precious metals, considered as safe haven assets, each metal will have a particular evolution that is influenced by different factors. For example, in the case of gold, Raisin’s experts point out that “a good time is when inflation is expected to take hold and reduce the value of the national currency.” And they add that leading indicators such as the stock market crash and political turmoil often imply a future devaluation of the country’s currency.
In the case of silver, from XTB they emphasize that “it combines the unique characteristics of a long-term investment with the volatility of prices and speculative potential”. It is a more volatile asset than gold. In fact, they explain that “long-term investors and speculators who take risks” like it.
Associated costs
Although this market can be attractive, before investing in gold or silver, the costs and risks associated with the investment must be taken into account. Especially if you choose to physically buy precious metals. This is the most traditional way of investing in gold. However, as highlighted by Raisin, it carries more risk “when it can be lost or even stolen”, since precious metals have a high value.
For this reason, this type of investment forces you to take into account storage, the possibility of contracting insurance and the costs involved, since they will affect profitability. Specifically, investors may resort to a personal safe, from a private company or resort to specialized storage companies.
In any case, to keep the investment safe, it is also recommended to pay for specific insurance. To choose one, the insurance policy must be taken into account, if it covers the entire value of the investment in precious metals and other types of clauses are included in the contract.
