Gold as an investment class
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Gold has historically been the precious metal of choice for most investors. During upheaval in the market, gold can provide safety and security for your investment portfolio. If we look back at every financial crisis, it is glaringly obvious that gold has risen to new heights during these times of uncertainty.
During the 2008 market crisis, gold reached its highest point in 2011. Similarly, at the height of the economic crisis created by the global pandemic last year, gold once again touched historical highs in August 2020. Even during a normal period in the market, gold performs steadily. Although the yellow metal may rise or fall in the course of market transactions, it does not suffer from extreme volatility. This makes it a fairly safe bet for most investors.
Silver investments can also be attractive for investors
But, does it make sense to invest in silver? The white metal is a lot cheaper than gold and provides investors with affordable and easy access to the precious metals markets. Due to the widening gold-silver ratio, an entry-level investor may find it more attractive to buy silver.
For the amount of money that one may spend on buying gold, a substantial amount of silver can be acquired. Additionally, silver has suffered from production shortages in the last few years, while demand has risen substantially. As a metal, silver has certain sterling properties. It is one of the most conductive metals and also very ductile. Due to this, it is in demand across several industries like solar, electronics, electric vehicles, etc. Silver investors believe that the price of the white metal may escalate significantly in the years to come, and it may be prudent to lock in investments at low prices now. This may create a wonderful opportunity to reap profits when prices start to rise.
Should an investor buy both precious metals?
It’s actually most prudent to own a mix of both gold and silver. Gold is a more established safe-haven asset, so tends to gain more from market downturns and volatility. Silver can also perform well in these circumstances but also benefits when industrial demand for silver increases as it’s used so widely in electronics. While silver certainly has more opportunity for huge growth, gold is the steadier of the two.
Of course, there are certain advantages and disadvantages of buying silver. For example, an investor may need to pay VAT on most silver investments. This can escalate the buying price by 20%. Silver coins that are legal tender in the UK can qualify for Capital Gains Tax (CGT) exemption. However, other silver investments may not.
Investment factors that need to be considered
Silver investments can be more volatile when compared to gold. So, if you are focused on building a strong portfolio and hedging risks, gold may be a natural choice. However, if long-term profits attract you, silver investments may fulfil this objective. Gold offers better returns in the short-term and silver can provide you with an opportunity to capitalise over the longer term.
Historical price charts show us that silver tracks gold in terms of growth. So, many investors believe that the rise of gold will be followed by silver and the gap in their ratio will eventually close to around 25:1. Also, the production prices of silver are higher when compared to gold. This is simply due to the price difference. Production price margins are calculated in percentage terms and due to the low price of silver, this can be a lot higher. When it comes to gold, due to its much higher prices, the production costs become negligible.
Call our investment team for advice on all your precious metal investments
Physical Gold is one of the largest gold dealers in the UK, with an impeccable reputation for providing great value and services to investors. If you are thinking of investing your money in precious metals, please call us on (020) 7060 9992 or drop us an email via our website.