How should you invest smartly in gold and silver?
Are you hesitating to invest in gold or silver? Both precious metals have their own advantages and disadvantages. Throughout history, there were financial systems based on both gold and silver. In bi-metallic systems, even both precious metals - both gold and silver - were accepted as legal tender. Whatever you invest in: diversification is often a safe choice to limit losses and average gains.
Gold is a store of value and has been known as a trusted currency for 5,000 years. It is redeemable all over the world. Silver also has a rich history, but is not equally common around the world.
A healthy gold-silver ratio
In the past, gold and/or silver was often chosen as the backbone of the financial system. It serves to keep money creation (read: inflation) in check. A healthy gold-silver ratio used to be - according to ministers - 1 gram of gold equals 15 grams of silver. The ratio was mainly a convenient tool to know how many silver coins you needed when you did not want to pay in gold coins.
A low gold-to-silver ratio means that the price of silver outperforms that of gold. However, in recent decades it has usually been the other way around: gold almost always performed better. The gold-silver ratio can be an important argument in your buying consideration. Does this ratio match current valuations, or are the figures far apart? By taking this into account, you avoid over- or undervaluing gold or silver.
Choosing is not losing
It is often the safest choice to opt for a spread of gold and silver. By investing in both precious metals, you limit losses and average gains. The choice between gold and silver depends on your personal preference and the market situation. Gold is known worldwide and is often seen as a safe haven. Silver, on the other hand, has a low entry threshold and can be interesting for investors with a smaller budget.
It is important to remember that the price of precious metals can be volatile. It depends on supply and demand. It is therefore wise to do proper research and seek advice before investing in gold, silver or other precious metals.
How can you invest well?
Gold is seen as a safe haven that offers protection against inflation and economic downturns. Investing in gold or silver can be done in various ways. Investing in gold can be done, for instance, by buying gold coins, mutual funds or synthetic trackers. Investing in silver can be done, among other things, by buying silver or by investing in silver mines.
Please note: there are always risks and costs, such as storage costs, associated with investing in precious metals.
One risk that is already eliminated is counterparty risk. In other words, you are not dependent on third parties. When investing in shares or the like, the third parties have to fulfil their obligations so that you keep the value of your investment. For example, suppose a company you have invested in gets into financial trouble, you risk losing money. Because there is no counterparty risk, we consider gold a safe investment in times of economic uncertainty.
What are the different forms of investing in gold and silver?
Investing in precious metals such as gold and silver can be done in several ways. Below is a list of some investment ways. It is up to you to choose which way you want to invest.
1. Physical investing
Physically investing in gold or silver can be done by buying jewellery, (gold) bars or coins. You make such a purchase through a jeweller, coin dealer or reliable online marketplace.
2. Gold account
Rather not have physical gold or silver? Then you can open a gold account. Opening a gold account works just like an ordinary bank account. The value of your purchased gold is put on it.
3. Investing in ETFs
Investing in ETFs (Exchange Traded Fund) can be an interesting choice. Through an ETF, you can invest efficiently and get instant access to gold or other precious metals. In doing so, you do need to remain extra vigilant about the type of tracker you buy.
4. Indirect investment
Investing in precious metals can also be done indirectly through buying shares in gold and silver mines. These include not only gold or silver, but also minerals.
5. Derivative contracts
Derivative contracts can be leveraged products or futures. This allows you to sell or buy silver or gold at a predetermined price on a date that is in the future. Beware: this is very risky and only suitable for professionals.
Ready to invest in gold or silver? We are happy to help you and are ready to answer all your questions.