The Hidden Power of Precious Metals: Why They Should be Your Portfolio's Best Friend

by Rush Vann, Breaking Now News
September 22, 2024

When it comes to investing, many people overlook the significance of precious metals in a well-rounded portfolio. Surprisingly, a common misconception is that gold, silver, and platinum are merely dull and low-yield options. However, the reality paints a vastly different picture.

Why Precious Metals Deserve Your Attention

Since the dawn of the 21st century, gold and silver have shown remarkable returns, matching the S&P 500 at a stunning 9.75% total return. Over the past half-century, gold has delivered an 8% return, while the S&P 500 has outdone it at 11.47%, albeit with higher volatility. This data counters the notion that precious metals are unexciting investments.

Understanding Market Correlations

Precious metals often display an inverse correlation with other assets. When one rises, the other frequently dips. While this hasn’t been a strict rule this year, it remains a useful principle for hedging. For instance, gold has surged by 19.5% this year, closely keeping pace with the S&P 500’s 18% gain.

Why Do Investors Choose Precious Metals?

Most investors look to precious metals for two primary reasons:

1. **Inflation Protection**
2. **Defense Against Currency Depreciation and Global Tensions**

The Big Question: How to Invest in Precious Metals?

Many investors often ask how they should go about purchasing precious metals. Here are several viable options:

• Gold/Silver Coins: Various denominations are available from dealers for a premium over the current spot price. Coins like the American Eagle, South African Krugerrand, and Canadian Maple Leaf are considered legal tender, offering an advantage over bullion that must be weighed and assayed before sale.
• Exchange-Traded Funds (ETFs): The largest gold ETF is symbolized as GLD. SPDR Gold Shares track the daily spot value of gold bullion. Additionally, investing in mining stocks can yield returns that sometimes outperform the metals themselves. However, it’s essential to consider the company's performance, reserves, and profitability.

Investing Wisely: Determine Your Purpose

When contemplating the purchase of precious metals, it's crucial to clarify your ultimate aim. Precious metals serve as effective diversification assets compared to stocks, bonds, or real estate. While buying and securely storing gold coins is a sound strategy, the high cash outlay—around $1,600 per ounce—can be quite steep. Conversely, ETFs are user-friendly, liquid, and suitable for retirement accounts, though they may exhibit more price volatility.

As with any investment, it's vital to familiarize yourself with the asset, conduct thorough research, and recognize the importance of diversification.

John Rush Vann Jr., d/b/a Vann Investment, is a Registered Representative of Rhodes Securities Inc. and an investment advisor representative of Rhodes Investment Advisors Inc. Investing in securities involves the risk of loss.

What Do You Think?

• Do you believe precious metals are undervalued in today's market?
• Are gold and silver investments still relevant in a digital currency age?
• Should retirement accounts include physical precious metals?
• Is the volatility of precious metals a deterrent for long-term investors?
• What are your thoughts on investing in mining stocks versus physical metals?