Safe Investing with Gold and Precious Metals

Gold investment has been a popular investment tool throughout history, seen as a haven by people and resistant to economic fluctuations. This precious metal holds an important place in the portfolios of investors worldwide. For both individual investors and large financial institutions, gold is considered one of the cornerstones of both asset protection and long-term investment strategies.

The value of gold in international markets is determined by the weight of 1 ounce of pure gold, which corresponds to 31.1 grams, and the USD price. When looking at the general price of gold, the striking pattern is that the price of gold increases in periods when risks that will affect economic conditions increase.

Wars, terrorist attacks, political crises, economic uncertainty, crises, and high inflation expectations create suitable conditions for the price of gold to increase. The simplest explanation for this is that investors avoid risky assets and turn to gold during this period.

In addition, the value of the US dollar, Central Bank policies, and developments affecting the supply-demand dynamics of gold also affect the price of gold.

What is gold investment and how is it done?

Gold investment is a type of account that allows you to save gold on a gram basis. The basic logic in this type of account is to generate income from the rise in gold prices. In other words, the traditional savings method has been transferred to a bank account.

People who want to buy and sell gold or save usually turn to this type of account. Because you do not need to physically take gold to the bank to open a demand gold account. Transactions such as opening an account and making purchases and sales can be easily carried out via the Internet or mobile branches.

According to Forbes commodity analysts, the best option for those who want to make small-scale gold investments is gold coins that can be purchased in quarters, half, whole, or grams.

Analysts point out that the values ​​of gold purchased in different sizes may change, and that return and resale opportunities should be evaluated according to the most suitable size. Analysts recommend gold certificates for those who are afraid of theft but also want to make a physical investment.

Gold certificates allow investors to own precious metals without having physical gold in their hands. The certificates are obtained through agreements with banks, and the gold purchased is protected by the banks.

Of course, investors must also pay the additional fees required for these transactions, as well as insurance and storage fees. Experts point out that investors can also see gold investment funds traded on stock exchanges as an option.

Since gold investment funds do not have a specific maturity condition, they can be sold and repurchased whenever desired. This investment is not affected by gold prices because the funds equalize the physical gold prices with the money traded on the stock exchange. With these funds, investors do not have to pay additional fees such as insurance, factory production costs, and storage.

What are silver and other precious metals?

Silver, just like gold, is one of the oldest metals in history. Silver, which comes after gold in the ranking of the most valuable metals, is used in many business lines such as electronics and telecommunications, as well as jewelry designs. Silver also stands out as an important investment tool.

Silver is often preferred by investors who want to diversify their portfolios. The price of silver can change depending on many factors such as the balance of demand and supply, economic factors, and other market conditions.

Copper is a metal widely used in many sectors due to its properties such as electrical conductivity, heat conduction, and corrosion resistance. The demand for copper from different sectors also ensures that the financial value of this metal is high.

The industrial value of copper increases its investment potential considerably. Growth in sectors such as construction, energy, and automotive can also increase the stock market price of copper.

Platinum, one of the most valuable metals in the world, is an important metal frequently used in both industrial applications and the jewelry sector. The interest in platinum, which has found a place for itself in many sectors due to its corrosion resistance, electrical conductivity, and catalytic properties, is quite intense.

For this reason, platinum group metals are known as the most expensive metals in the world. Platinum can be seen as a good investment tool by investors. Platinum buying and selling transactions, which are traded in many countries and stock exchanges, bring profit to investors.

What are the differences between physical gold and gold certificates?

Gold Certificate is a capital market instrument that is issued without maturity within the scope of 5 tons of gold export ceiling of 0.995 purity, each representing 0.01 grams of gold, and allows its owner to convert into physical gold within the scope of the Prospectus published in the central banking regulations.

Gold Certificates, which can be obtained in stock exchange markets, can be resold on the Stock Exchange and also offer the opportunity to request conversion into physical gold. Investors will be able to start submitting their requests for conversion to physical gold 4 (four) months after the certificates are opened for trading on the Stock Exchange.

First, it may not be possible to hold every precious metal physically in your hands, especially the platinum group metals such as platinum, palladium, rhodium, iridium, ruthenium, and osmium. Therefore, if you want to invest in these metals, it would be logical to turn to funds that include them in their portfolio.

Let’s look at the precious metals that you can physically hold (especially gold and silver). Storing gold and silver physically is both risky and in some cases involves a storage cost. There is a cost for a custody service to be received from a bank. Storing it with your own means carries extra risk. In this sense, gold-based instruments/funds protect you from the risk and cost of custody. 

Let’s say you hold gold physically. In this case, when selling or calculating your return, pay attention to the difference between the buying/selling price of gold (spread). Remember, when you want to sell gold, a different price is applied, and when you buy it.

We see that the difference between these buying and selling prices increases a lot on days when the markets are active. There is no such difference in precious metal funds; there is only one price.

How do precious metal markets work?

Gold and silver have been recognized as precious metals for a long time in history and have been used in many areas. Today, we see that precious metals are included in most investors’ portfolios.

Precious metals provide very good portfolio diversification and can be purchased to protect against inflation. Gold is the most preferred in this regard. Silver, platinum, and palladium are metals that can be added to your precious metal portfolio, and each has its own risks and opportunities. Investors can also access precious metals through precious metal ETFs, investment funds, and mining company stocks.

There are many ways to buy precious metals such as gold, silver, platinum, and palladium, and there are really good reasons to invest in these metals as follows:

Financial concerns: When banks and currencies are unstable and/or political turmoil occurs, demand for gold, which is a safe haven, increases.

Inflation: When real rates of return in equity, bond, or real estate markets are negative, people want to own an asset that will maintain its value and not lose it. This is usually gold.

War or political crises: We have always observed that people accumulate gold during wars and political upheavals. A precious metal like gold continues to be the only asset that can be used to meet needs such as food and shelter that will last a lifetime.

How to manage risk in precious metals?

The first thing investors who develop investments in precious metals should know is that these metals require management as well as being profitable. Although the risk share in precious metal portfolios is in a visible position, it can be tolerated compared to other investment models.

Another important topic in the commodity group, apart from energy and food, is precious metals. Precious metals have an important place in the global economy in terms of being offered to consumers as end products and being used in various stages of industry and production.

In world markets, gold, silver platinum, palladium, rhodium, iridium, ruthenium, and osmium, which are known as the platinum group, are considered precious metals.

One of the two basic elements of defining these metals as ‘precious’ is their rare and high-cost acquisition stages and features of these metals. The most important of these features are durability and being easily processed.

Precious metals such as gold and silver are used especially in jewelry-making, as well as in many stages of production together with other metals such as platinum and palladium in the precious metal group. They are frequently needed metals in chip production, which has experienced a supply crisis in recent years, in other electronic goods, and in the automotive and health industries.

See you in the next post,

Anil UZUN