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During this time of global economic uncertainty where banks are failing us and offering practically no incentives to save, should we withdraw our savings and buy precious metals? Should we hide a pot of gold under our mattress?

Gold has always been the safe haven during economic turmoil, political unrest, and times of war. The gold market is not impacted by global occurrences and supply and demand in the same way as other assets. During periods where interest rates are very low and market returns are generally not high on other assets, gold prices tend to go up.

So, does this mean it’s better to have most of your cash invested in gold? The age old saying of “do not carry all your eggs in one basket” rings true. No one can foresee the future, and to future proof your finances you need to diversify. As with any investment portfolio, it is important to have a diversified mix of asset classes to spread your risk. 

Gold is a stable commodity and adding it to your portfolio could help reduce volatility and risk during economic instability. Also, it offers inflation protection as precious metals do not carry credit risk or are affected by inflation *

Let’s have a look at the pros and cons of adding various precious metals to your investment portfolio.

Gold

The king of precious metals, gold, is durable, malleable and can conduct heat and electricity. It is used in dentistry and electronics but is mostly used in jewellery and as currency.

  • It is a stable commodity when markets are in economic turmoil
  • Gold maintains its value – no inflation eroding away at your investment
  • People stock up on a tangible asset when war or political strife occurs, as currency and banks could be impacted or even suspended

Silver

The price of silver is a bit more volatile. Although it is considered as a commodity for storing wealth and used in fashion jewellery, it is also used as an industrial metal in electronics, batteries, film, and medical products. 

  • It is used as a wealth hoarding commodity
  • It’s value as an industrial metal affects its value and can make it fluctuate
  • The higher the demand for products in which silver is used, the more it grows in value and vice versa

 

Platinum

Platinum is also traded around the world on the commodities market. It fetches a higher price than gold and silver because it is rarer. It can also fluctuate due to its use as an industrial metal in the automotive industry.

  • It has a higher value than gold, but its price is determined by global demand in jewellery and automotive industries
  • Because platinum mines are mostly concentrated in South Africa and Russia, there could be cartel-like price fixing

 

Palladium

The least known of precious metals, Palladium by far has the most industrial value. It is used in the automotive industry for catalytic converters, electronics, medical equipment, dentistry, chemical applications, jewellery, and ground water treatment. 

  • Mixing palladium with gold makes it stronger than white gold
  • It is 12.6% harder than platinum and can be moulded into thin sheets of metal used in solar energy and fuel cells
  • It’s ability to speed up chemical reactions makes it better suited for catalytic converters than platinum
  •  Like platinum, it is also slightly volatile as its price depends on supply and demand in the manufacturing and automotive industries

Precious metals prices could drop when there are more sellers than buyers in the market, but they do offer protection against inflation and prices tend to rise during global economic volatility.

It is good to diversify your portfolio and include precious metals. They give some degree of stability and spread risk in tough economic times. Your adviser will be able to help you add the right percentage of commodities into your portfolio according to your individual needs.

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* https://www.investopedia.com/

Please note, the above is for education purposes only and does not constitute advice. You should always contact your deVere adviser for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.

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