Precious Metals: Investing In Gold, Silver, Platinum, Palladium

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Gold and the other precious metals such as silver, platinum, and palladium may play two roles in your investing strategy:

• As a small core holding in your portfolio
  to play the role of an 'insurance policy' or 'disaster hedge'.
• As an investment
  You may buy a gold mining company stock / share like any other.
  Or as speculation, offering the chance for large profits (or losses), due to the high gearing available in precious metals trading, and the sometimes volatile nature of the markets.

As a disaster hedge, investing in gold and other precious metals assists you to create a balanced portfolio that will enable you to survive and prosper in all types of economic climate.

One of the key investing skills is the ability to combine a mixture of 'defensive' and 'aggressive' securities to arrive at your own balance of risk and reward.

Wise investors throughout history have always kept a portion of their assets in gold. It was, and still is to some extent, viewed as a hedge against widespread economic or social collapse.

Today you will still find a small percentage of gold or gold-backed assets in most sophisticated portfolios. The major reason for this is that traditionally, gold has moved in tandem with fears of inflation.

Historically gold has been the currency of fear.

Whenever investors lose confidence in paper currencies (fiat money) they turn to gold as the one true measure of wealth.

Apart from investing directly in gold or silver bullion, you have the folllowing routes into precious metals investing:

• Coins
  You have to decide whether to elect for collector (high premium) coins, or bullion coins, with a low premium over gold.
• Metal or mining stocks / shares
  If you invest in stocks / shares of mining companies you'll need to choose which ones:

South African
American
Canadian
Australian

• Open-ended Investment Funds
  (U.S. Mutual Funds, UK Unit Trusts and OEICs, European SICAVs, Exchange Traded Funds)
  A number of these are available specializing in precious metal-related investments.
  Primarily they concentrate on holding stocks / shares in gold and other precious metals, and mining companies. They offer you the opportunity to participate in this sector without the burden of day-to-day management of your portfolio.
• Futures
  In which you take an option on the future movement of prices, without actually taking delivery of the metal.
• Commodity Funds
  Open-ended funds investing in specific physical metals, or commodity futures. SIB regulations permit this.

If you are a nest-egg investor you will have difficult decisions to make at times.

High interest rates may accompany political and economic uncertainty, so your two reasons for holding gold are at odds with each another.

What is more, times of uncertainty may cause a rush into gold, pushing up its price: this may induce you to sell to make a capital gain.

Investing in gold, silver, platinum, palladium and other precious metals has always been a strategy for balanced investment portfolios and you should consider it to be included in yours.