Finance & Investing Advice

Gold and silver are probably the most common precious metals on the market today. The former has particularly been used as a form of currency since time immemorial and it is still acceptable as medium of exchange in most parts of the globe. These metals can be owned in the form of jewelry, artifacts or simply coins.

For many people, owning any of these metals is not only considered as a symbol of wealth; it also means you have a financial cushion against economic uncertainties that could bring down the value of currencies. However, this does not mean that investing in precious metals is foolproof. Like in any other form of investment, there are some factors that influence the prices of these valuable metals. It is important to understand these factors especially if you are considering investing in one or both of them.

gold and silver bars

Industrial Demand

Because of its properties, silver is an important raw material in certain industrial processes. Some of these processes include manufacture of computer chips, cell phones, batteries, solar powered generators, refrigerators and many more. As the demand for products that use this metal rises, so does the demand, which drives up its price.

It is also used many other electronic products that rely on silver’s incredible ability to conduct electricity. Normally, it is used to join other metals through brazing and soldiering. Actually, it has so many uses that the demand for it is not likely to go down in the near future.

In fact, many countries are embracing green technology and may use silver in HTS transformers as they are much more environmental friendly than the standard copper wiring.

The US Dollar’s Performance

Financial experts and advisers will tell you that there is an inverse relationship between silver price, gold price and the US Dollar. When the dollar is doing well, people have no hesitations to invest in dollar-related stocks and bonds. In such a case, both these metals suffer because fewer people are willing to invest in them.

american currency

However, once the dollar starts showing signs of poor performance, investors are very quick to pull out their funds to invest in these metals. The fact that the US Dollar is accepted as a valid currency in many countries means that any decline in its value will drive the value in most parts of the world. The inverse relationship will manifest if the dollar regains its strength and value.

Oil prices

The price relationship between oil and these metals remains a contentious issue, but the fact is oil prices have the ability to dictate the prices of most commodities in the market. Oil is the essential form of energy that is used all over the world to not only transport goods, but to also power up machines through LPG.

Once the price of oil goes up, virtually no commodity is spared from the same fate, and since gold is an accepted form of currency, it therefore goes without saying that it will cost more to buy any metal. Another logical approach or argument is the fact that these prized metals seem to appreciate in value as inflation rates soar. Any increase in the price of oil almost always results in inflation, and an increase in price is inevitable.

Supply and Demand

Another relatively obvious determining factor for the prices is the supply and demand pattern. For instance, if miners decide to go on strike for some reason and no mining goes on for a specific period, the market is bound to see a rise in the price of metals that is circulating the market. Likewise, when investors are rushing to buy it due to an economic crisis that has devalued the dollar, the prices are likely to go up.

buying gold

Federal Reserve Banks’ Policies

Most people opt to save their money in banks with hopes that they will get competitive rates, which will see their savings increase in time. However, if the central bank decides to lower its interest rates on savings and deposits, more people are likely to shy away from investing in the currency and opt invest in metals.

The Relationship between the Two Metals

Amazingly, silver relies heavily on gold to perform. It actually has more dominance in the industrial sector compared to the financial world and hence benefits from gold just from being in the same category of precious metals. Anytime gold prices rise, silver catches up soon after, but it tends to plummet much lower than gold when precious metals lose value.

March 24th, 2014

Posted In: Finance, Investing Advice, Retirement Funding

Tags: , ,

Leave a Comment

Investing in gold and silver is an effective way of safeguarding against inflation. You can make a long term profit, providing the metal continues its’ historical trend of increasing in value. Notwithstanding, due to the turbulent global economic conditions, many shrewd investors have turned to silver, which often bucks market trends over time.

Needless to say, as with all forms of investment, nothing is certain. Prior to risking any of your funds, you should make sure that you have a sensible game plan, and understand the intricacies of precious metal markets. By doing this, you will give yourself the best possible chance of profiting. Here is some advice about silver investment, which should help to swing the odds in your favor.

Familiarize yourself with the numerous different investment methods available. You could make investments in ETFs, mining companies, bullion, coins or futures. Generally speaking, coins or bullion are the most reliable and low risk items to invest in.

Indeed, opting for physical metal is a pretty safe bet. This way, you avoid committing to futures contracts, where you have to purchase thousands of ounces. Also, you avoid having to fund the energy expenses of mining companies. For novice investors, futures and mining companies are too risky a proposition.

Never invest in silver before carefully examining the market. Precious metal investments are considerably different to investments in bonds and stocks. Do some research. If you struggle to grasp the dynamics of market behavior, enlist the services of an expert, who will guide you through the process of buying and selling.

Make the most of the internet to educate yourself about investing. However, do not take everything you read as gospel. The World Wide Web is filled with information about investments in precious metals. Unfortunately, much of this information is wrong. It is far better to copy what experienced investors are doing, because they are at the coal face monitoring the markets, and investing their own money each day.

One proven technique, when investing in bars and coins, is to buy from people who are only charging a modest fee and selling near to the metal’s spot price. Typically, the amount of fees you pay should decrease, relative to the quantity of silver you buy. Normally, when purchasing coins, it is better to purchase silver rounds or bullion coins. This is a better choice than purchasing coins for numismatic reasons (i.e. for their value to rare coin collectors). If you collect rare coins yourself, this rule will not necessarily apply. Notwithstanding, most of the time, bullion coins are the recommended option for investors.

Keep regularly updated with market developments. Eventually, you will know the right time to buy and sell instinctively. Based on your personal investment ambitions (and the bull market), there might come a time when it is advisable to sell a large percentage (or even all) of your silver bullion for currency. However, you can only determine the correct time to sell or buy, if you have access to the latest market investment data. There are many websites online that provide this data, so that you can make the best possible investment decisions. Some websites specialize in providing data about particular precious metals.

Prior to making any silver investments, always determine the amount that you can afford to risk. To do this, you will have to take into account your readily available funds, your IRA rollover cash, and any other valuable assets that you want to invest. Make sure that you have a cash contingency fund in place, for any unpredictable costs. This way, you will be spending within your means.

Of course, your portfolio should still include gold. However, if you are a novice investor, it is best to purchase small pieces of gold gradually, when your budget permits. If possible, try to consult an expert at a gold investment firm. They can assist you with managing your portfolio, if you are setting up a gold IRA or rolling over a 401k to a gold IRA. They can help if you are investing large sums of cash and having your bullion delivered as well.

Always try to think clearly and remain emotionally detached. It is important to be aware of the investments you are making. Each year, lots of Americans are tricked into purchasing bullion that is exactly the same as other stock, or unsuitable for investment. If you want to safeguard your investment funds and hedge inflation, tangible assets like bars and coins are the best way to do it.

February 16th, 2014

Posted In: Finance, Investing Advice, Stocks & Bonds

Leave a Comment