How To Invest In Gold And Other Precious Metals

Matvey had been thinking about investing for a long time, and when he finally saved up the required amount, the market began to frenzy due to sanctions. He read that during periods of instability, it is most profitable to invest in gold.

Are investments in gold the safest?

On the one hand, gold, like other metals, cannot depreciate to zero even during periods of hyperinflation and global turmoil in financial markets. In this sense, it is truly more reliable than securities and currency.

Typically, during economic downturns, when stocks and many other assets become cheaper, the demand and prices of gold and silver rise. For example, in 2020, at the height of the coronavirus pandemic, the price of gold jumped from 3,000 to 4,900 rubles and silver from 35 to 68 rubles per gram. Stocks and bonds, on the contrary, lost value as many businesses suffered due to quarantine measures.

If you include precious metals in your investment portfolio, they can act as a hedge against large losses during stock market volatility.

But on the other hand, the prices of gold and other metals themselves fluctuate greatly. If you decide to invest for a short term, there can be no guarantee that such investment will be profitable.

For example, from the end of February – the beginning of March 2022, gold rose in price from 5,500 to 7,800 rubles, and silver – from 60 to 100 rubles per gram. And the entire stock market collapsed. But then the cost of precious metals went down, and many securities regained their losses.

Therefore, investing in precious metals is usually recommended as a long-term investment – for 10-20 years. Over the long term, the growth in their value most often outpaces inflation. But during the same period, other assets can bring you more money.

There is no point in investing all your free money only in gold – instead of profit, you can get losses. Likewise, it would help if you didn’t get hung up on other assets. It makes more sense to include different types of instruments in your investment portfolio – diversifying investments will reduce the risk of large losses.

Which assets to choose depends on how much and for how long you are willing to invest, how risk-averse you are, and whether you are willing to spend a lot of time analyzing the stock market.

Understanding a Traditional IRA

Traditional IRAs allow investors to invest exclusively in stocks, mutual funds and other traditional assets. The Internal Revenue Service (IRS) allows Self-Directed IRA account holders to purchase gold or other approved precious metals. Some of these metals include silver, platinum or palladium in the form of bars or coins.

However, keep in mind that since these accounts require you to buy and hold precious metals, they come with higher fees. You can also use gold IRA funds to invest in any gold-related securities, such as:

  • ETFs are exchange-traded mutual funds (ETFs).
  • Shares of gold mining companies
  • Mutual funds investing in precious metals
  • Futures contracts for precious metals