Friday, August 30, 2013

Diversifying Your Precious Metal Portfolio

Investors have been diversifying their investment portfolios with precious metals like gold, silver, platinum and palladium for some time now, but how many are aware that it’s actually beneficial to also diversify their precious metal portfolios? Too many eggs in the one basket is what investors are trying to avoid when they diversify their precious metal portfolios, which is exactly what diversification is all about

Investing in precious metals


Precious metals, particularly gold, have proven to be an excellent investment choice historically and will always continue to be, as is the consensus amongst industry experts. However, gold isn’t the only precious metal investors have been adding to their investment portfolios and when experienced investors show investment trends like this it pays to sit up and pay attention.

Gold is used in a variety of industrial applications in addition to the production of jewellery, and that’s also the case with the other precious metals investors are increasing opting for – silver, platinum and palladium. Gold is, however, still the most popular precious metal investment at the present point in time and will likely always be – hence it’s known as ‘the king of metals’ – plus its long term correlation with the price of crude oil will always make it a popular investment amongst savvy investors. 

Silver


After gold, silver is the next most commonly invested in precious metal and it’s commonly invested in by shrewd investors to offset risks in other investments. At the moment, investment experts are advocating investing in silver in order to offset such risks. Historically, the correlation between gold and silver is somewhat skewed, though it averages out at about 1:15 – 1:20. At the moment it’s at 1:50, which means silver has the potential to surge higher and back to the historical average without representing abnormal market behaviour. Silver therefore boasts a much higher growth potential than gold. 

Platinum


Platinum hasn’t had the lengthy history that gold and silver have because in comparison it’s a rather recent addition to the list of precious metals. Often known as ‘rich man’s gold’, it’s a relatively scarce metal and at this point in time it’s in high demand due to supply problems in South Africa, one of the most prominent sources of platinum, plus it has, in recent times, further endeared itself to investors because of rising demand amongst the automotive sector. 

Palladium


Palladium is even rarer than gold or platinum, though like the better known precious metals it too has a wealth of applications including catalytic converters in vehicles, electronics, fine jewellery and medical instruments. Like platinum, investment interest in palladium is on the rise due to the number of applications it can be used for and its scarce supply.

Market volatility


Volatility in precious metal markets is one of the most prominent reasons for diversifying investment portfolios. For example, when the price of one precious metal drops, it can be buffered by another. This is the intention behind investment diversification, and not only diversification of precious metal investment portfolios either, but all investment portfolios. 

How to invest in precious metals


Investing in precious metals is very straightforward and you can take care of the entire process online. If you want to buy silver, platinum or palladium, you can do so through the same channels as you would when buying gold, since most gold brokers also deal in other precious metals and they can arrange the same secure storage options as would be used to store gold; essentially a secure vault in a country of your choosing overseen by one of the leading names in security, like Brink’s, Rhenus and G4S.

About the Author:
GoldMoney is a UK company offering solutions to those who are interested to buy silver, gold, palladium, and platinum. They also have services for the safe storage and delivery of such precious metals.



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