While precious metals don’t generate cash flows and costs money to manage them, mining companies generate cash flows and often pay dividends. As a result, many investors keep gold in their portfolio specifically in case they need liquidity in a downturn. The most important thing that distinguishes precious metal investments from other commodity investments is the benefits. So if you decide to invest in gold and think you’ll be “one of the smart ones” when the dollar drops, you may have simply flushed your money down the toilet
.
Just like holding a dollar bill in your hand, you have the security of knowing that you can actually have your investment in the form of gold bars or silver coins in your hand (or stored in your safe). However, WPM’s valuation is not results-oriented — it is determined by precious metal prices, particularly silver and gold. I think both examples are reasonable and a small allocation to precious metals within a portfolio that otherwise consists primarily of stocks and bonds and real estate is appropriate for many people. Silver is used in traces in almost all electronic devices and in many other industrial applications, such as glass and solar panels, and is in practice more of a functional metal
than gold. I don
‘t mean to sound like a broken record here, but just like gold and silver, platinum isn’t the investment you’re looking for. In times of uncertainty, people turn to gold because they mistakenly assume that it will be a safe investment. Learning how to invest in gold and silver is a challenge, as direct investments in any commodity are fraught with headwinds. Compared to other metals, there are relatively few consumer or industrial applications for assets such as gold and silver
.
In other words, it’s as if their debts go up and down with the price of metal and their profits, making it less risky for them. There are plenty of ways to invest in gold and silver, and the best method may vary depending on your goals. In contrast, when times are good, investors tend to pull their money out of gold and invest it in investments that are more closely linked to the overall economy. Typical precious metal investments therefore not only do not generate cash flows, but depend solely on the metal rising in price, but investors also start with losses due to the associated
costs.
