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Precious Metal Investments

Many people make precious metal investments out of interest.

Gold bars are bought and sold on the world market every day. [© Jupter Images, 2009]
© Jupter Images, 2009
Gold bars are bought and sold on the world market every day.

Precious metals are rare metallic elements that have significant worth in the world economic system.

Surprisingly, the worth of some precious metals, such as gold, increases as the state of the economy falters or the dollar value falls, according to Precious Metal Investment. However, investors should be aware of precious metal investment get-rich-quick schemes -- and keep in mind the prices fluctuate, regardless of what the economy is doing.

Gold

Gold is one of the most common precious metal investments. Gold prices rose to well over $1,000 per ounce by early 2009 as the stock market continued to decline. Some investors predicted that the price of gold could increase to as much as $2,000 per ounce during that time.

Silver

Although gold tends to be more expensive than silver, silver investments also increase as the economy flags. One ounce of gold is equal to 72 ounces of silver in price.

Platinum

In 1997, the U.S. Mint produced a platinum bullion coin, and investment in platinum has subsequently grown , notes the A to Z of Materials. Investments in platinum date back only to the middle of the last century. Although gold, silver and platinum account for most common precious metal investments, investors also pursue lesser-known precious metals.

Rhodium

The most expensive precious metal, rhodium, is similar to platinum and gives white gold its shine. At times, its price has risen to more than $6,000 per ounce.

Palladium

Palladium is a silver-white flexible metal that was discovered in 1803. Palladium investments increased because it is used in a car's catalytic converter. Then, the palladium investment rate plummeted because of a surplus due to Russian government sell-offs.

 

Precious Metal Investment Options

Investors have several options when considering how to invest in precious metals:

  • Bullion bars or coins. Also known as physical ownership , bullion coins are produced by the government for investment purposes. They are sold in various types of precious metals and the government guarantees their purity. Such precious metals can be purchased through retailers, banks, brokerage companies and wholesalers. Bullion bars, blocks of precious metals made by commercial refiners, are produced for investment opportunities as well.
  • Equity investments. Research studies have found that allocating a significant portion of an equity portfolio to precious metals increases portfolio performance overall, according to studies of the CFA Institute. In addition, the greatest benefit came from equity investment, rather than from purchasing the precious metals directly.
  • Government certificates. Investors can purchase precious metal certificates, rather than keeping the bullion themselves.
  • Jewelry. Investing in jewelry requires research and well-trusted contacts in the jewelry industry. Not all precious metals make good jewelry investments. For example, silver jewelry does not produce the same return as gold jewelry. Precious metal jewelry investments are divided into the categories of antique and modern. Following the law of supply and demand, scarcity can increase value.
  • Mines. According to the Commodity Futures Trading Commission, some individuals invest in precious metal mines. However, consumers should be wary of fraud with regard to mining investments, as with all precious metal investments.

Causes for Concern

Precious metal investors should be careful of companies that offer financing agreements and claim they will allow investors to make a significant amount of money with minimal risk.
These companies advertise on the radio, on the Internet, on television and even through telemarketing. Such companies minimize investment risk, charge interest fees that are fraudulent and take advantage of investors.

The Georgia Secretary of State publishes a pre-investment checklist to assist potential precious metal investors who are concerned about possible fraud.

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