Learn how to invest in precious metals, what options are available and the pros and cons of gold and silver metals investments.
It seems everyone is talking about gold these days. Why? It’s up over 35% in price since the start of 2024 and now analytists like Goldman Sachs and Citi predict it to rise even higher in 2025. We’ve also been talking about gold reaching $3000/oz since August on our regular podcast.
If you don’t already own gold, you might not know where to start. This article covers how to invest in gold, silver and other metals. You’ll also learn why people invest in these assets and the different paths you can take to add them to your portfolio.
Precious metals in a diversified portfolio
You’ve heard the saying, “Don’t put all your eggs in one basket.” If you only have stocks and bonds in your portfolio, you’re missing out on the chance to hedge your bets and reduce risk with a precious metals investment.
The whole point of investing in precious metals is that these asset classes do not follow the same trends as the stock market. Company earnings, the latest AI capability, some kind of cyber attack, or weakening jobs report data do not impact precious metals at all. In fact, these scenarios actually increase investor demand for these assets.
Most advisors recommend holding 5%-10% of your overall portfolio in metals. Gold is the strongest long-term option because it’s not as much of an industrial metal as silver or platinum. Both of the latter see increases in demand from manufacturing areas like automobiles and solar panels. Gold has a few industrial uses, but it’s mostly an investor’s metal.
In the Reddit r/Preppers forum, user jrichar shared their thoughts on diversification:
“Diversification is the key to managing risk in your investments. It’s a good idea to have some gold, silver, land, bitcoin, 401k, stocks, and other retirement funds in your portfolio.”
Ways to invest in precious metals
Here’s how precious metals investors can add these assets to your portfolio:
Physical precious metals
For the strongest diversification possible, you can’t beat owning physical precious metals. This means you actually buy gold in physical bullion, like coins or bars. It’s the ultimate way to hold these assets because:
Tangible asset
Physical gold and silver are tangible assets that you can actually hold in your hand. Why does that matter? It gives you complete control of what you do with the asset, and many investors like this security and peace of mind.
It also means that you don’t need an internet connection, a secure password or to wait until business hours to access your gold and silver.
No counterparty risk
You really don’t need anyone to do anything for you to control your physical precious metal. This means that a bank going out of business or a cyber attack has zero impact on you owning precious metals. Since you physically hold your metals, you don’t have third-party risk from someone else’s disaster or failure to hold up their end of a deal.
Private and confidential
Owning physical metal gives you a level of privacy and confidentiality. While your precious metals dealer may need to disclose certain transactions when you buy the metals, once you receive them, there’s no ongoing reporting required.
The only exception is if you hold precious metals in a retirement account like a gold or silver IRA, which we discuss further below. In that case, there are different IRS rules for reporting and even storing your metals.
No management fees
When you buy physical gold and silver, you’ll have initial fees like the premium over spot price plus shipping fees and potentially sales taxes. You’ll also need to consider the insurance costs for your precious metals and storage fees if you decide to house them in a secure depository.
But outside of these costs, you won’t have any ongoing management fees for your physical metals.
Portability
If you’re the kind of person who wants to prepare for dire emergencies like Reddit users, say, “When SHTF,” physical precious metals are the only way to go. Since you physically hold the asset, you can take it with you at a moment’s notice. Specifically, with gold, you can easily carry a large amount of wealth right in your pocket.
For example, gold is almost $2800/oz as of this writing. Let’s say you buy 10 ounces, which is about the size of a cell phone. In that scenario, you have $28,000 worth of gold that you can easily carry in your pocket.
If you decide to invest in physical gold and silver, you’ll open an account with a precious metals dealer like Swiss America. Our team also provides guidance on which metals, secure storage, and other details to help you meet your investment objectives.
Gold and silver exchange-traded funds
Gold and silver ETFs are shares you own in a fund that holds physical metals in a secure vault. You can also buy ETFs that focus on futures contracts, which track the price movements of gold and silver by trading price-based contracts.
Gold ETFs can be a way to gain exposure to metals in your portfolio, but they have some drawbacks compared to physical gold. The biggest issue is that they are paper assets. Sure, you “own” a share, but it’s entirely dependent on a third party to store and manage the gold and your ability to get internet access.
If you want to invest in an exchange-traded fund, you’ll open an account with a traditional brokerage firm.
Gold and silver options
You can also trade gold and silver futures contracts on your own. These investments are contracts to buy and sell an asset at a future date and price. Some more adventurous investors use this strategy to make bigger bets and potentially increase their returns.
The downsides here are that this is a very risky strategy, requires experience and even if you do have a great outcome, it’s still a paper asset.
You can get started with options training through a brokerage firm.
Precious metal mining stocks
Some investors might look at owning stocks in one or multiple mining companies. There are mutual funds that give you exposure to a broader portfolio of precious metals and gold miners. If you invest this way, you benefit from market demand plus any operational efficiencies the company uses to increase profits.
But, you’re now very reliant on the company to perform well. You’re also reliant on the stock market not to overreact if earnings don’t meet expectations.
Traditional brokerage firms can help you get started with mining stocks if you want to go this route.
Precious metals IRA
You can also invest in physical metal as part of your retirement account. This way, you’ll get all the same tax benefits as you would a traditional or Roth IRA while also adding some diversification to your portfolio. Here’s how it works:
Choose an IRA custodian: First, you’ll need to set up a self-directed IRA account with a custodian who manages your funds on your behalf. They take care of annual reporting, securely store your metals, and meet other IRS requirements. You’ll tell them when and what to buy, and they’ll make those purchases per your direction.
Transfer retirement funds: Next, you fund your account with a portion of your 401(k), convert your existing IRA or open a new IRA account. Work with your current fund administrator and your custodian to take care of the transfer and set up your gold or silver IRA.
Choose your metals: You’ll then work with a precious metals dealer to decide which gold, silver or platinum you want to buy. Note that the IRS does have metal purity requirements and they also won’t let you buy collectible coins in your IRA. But you can buy qualified gold, platinum, and silver coins and/or bars. Common brands include:
American Buffalo coins
Canadian Maple Leaf coins
PAMP Suisse bars
Royal Canadian Mint bars
Valcambi bars
Buy your metals: Your custodian purchases the precious metals, and the dealer ships them to the secure IRS-approved depository. From there you can work with your custodian if you want to sell or add more to your account.
Monitor: You can monitor the progress of your investments through your custodian, and if you work with Swiss America, you’ll also have access to our online portal. This account gives you a full history of your transactions and also shows you the real-time market value of your metals.
Sell: Once you reach retirement age of 59 1/2, you can liquidate some or all of your precious metal assets. Your custodian can help with this process to ensure you meet IRS requirements.
Pros of precious metals investing
No matter how you decide to invest in gold or other precious metals, adding these assets to your portfolio gives you many benefits beyond just diversification.
Hedge against inflation
You’ll hear this a lot because investors always point toward an inflation hedge as a reason to own gold. This can be a benefit, but it’s not always the main reason to invest in precious metals.
The World Gold Council analyzed 50 years of data and showed that gold returned 15% per year on average during periods when inflation exceeded 3% versus 6% annually when inflation was under 3%.
Safe haven asset
Investors also consider gold a safe haven asset. What exactly does this mean? They expect gold prices to retain or increase during times of economic uncertainty or market turmoil. What’s interesting about this is that it actually becomes a self-fulfilling prophecy because chaos makes people buy more gold.
Recent examples include:
Bank failures: During the 2023 bank failures, gold rallied over 9%.
Russian-Ukraine: Gold prices spiked 3% when Russia moved into Ukraine in 2022.
Great Recession: From 2008 to 2012, gold surged by more than 10%.
Store of wealth
One of the best ways to see how the store of wealth works in action is to observe central banks. These individual banks that hold each country’s treasury also turn to gold to protect their country from currency devaluation. Their role is currency management and monetary policy.
Since gold’s value is not tied to any currency, individual economic performance or government policies do not impact its prices. Holding precious metals gives these countries a way to preserve their wealth. Plus, if these countries hold gold, it can provide confidence in their ability to meet financial obligations.
The chart below shows that in 2024, central banks bought historical amounts of physical gold.
For individual investors, the same holds true. Your gold and silver do not rely on the US dollar, so if something happens and you need alternative currency, precious metals can be the answer.
Cons of investing in precious metals
While there are benefits to precious metals investment, you should also be aware of a couple of drawbacks so you can make the best decision for your situation.
No cash flow
With other investments like stocks or real estate, you can generate income and cash flow. Precious metals investing doesn’t make an income, so you forfeit this incremental benefit. Most investors consider gold and other metals to be an “insurance policy” since it protects wealth versus generating it.
If your whole goal is to store your wealth and reduce risks from world events and inflation, precious metals investing is a good choice.
Price volatility
Precious metals prices can change depending on market demand. You’ll see this espcially in silver and platinum where the prices tie very much to industrial demand. Gold is more about demand from individual investors and central banks.
A few ways price volatility in silver and platinum might affect you:
Silver
Silver demand comes from solar, electronics, and electric vehicles. Right now, solar is the biggest driver. If, for some reason, sentiment changes around sustainable energy, you could see a drop in silver prices. We shouldn’t also rule out that the electronics and industrial products industry finds some other metals that provide better capabilities. If this happens and you only own silver, it can be a risk.
Platinum
Now, for platinum demand, the biggest driver is catalytic converters, which run in gas-fueled automobiles. If people buy more EVs, demand can be reduced.
The best scenario here is to own several precious metals in a diversified portfolio. This way, if EVs continue to grow in popularity, you can benefit from your silver holdings. Or, if public sentiment or demand changes and more people buy gas-fueled automobiles, your platinum has greater value.
Choosing a physical metals dealer
If you decide to invest in physical precious metals, consider working with an established dealer like Swiss America. We’ve been in business for over 40 years, and our customers rave about their experience working with our team. You can be confident in the safety of your purchases and quality of the metals.
In addition to expert advice, you’ll also get access to educational resources like our in-depth guides, regular podcasts, and daily news updates.
We’re members of key precious metals governing organizations, which means you can be confident in the quality of our metals and our ongoing commitment to your overall experience.
Precious metals investments final thoughts
Investing in precious metals is a great way to diversify your portfolio with an asset that reacts differently than traditional stocks and bonds. Having a tangible way to preserve/store your wealth can give you peace of mind when chaos is happening around you.
To learn more about investing in precious metals, connect with a Swiss America expert today!
How to invest in precious metals: FAQs
What precious metal is the best investment?
Right now, gold is the best precious metal investment. This is its demand comes primarily from investors wanting to protect wealth or hedge against currency devulation. It’s not reliant on industrial uses which might decrease in demand if there is an economic downturn.
How much should you invest in precious metals?
Experts usually recommend that you invest 5%-10% of your overall investment portfolio in precious metals.
What is the smartest way to buy gold and silver?
The smartest way is to work with a reputable precious metals dealer who can guide you on precious metals options to best meet your needs.
Note: The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals before making any decisions or taking action based on this information.
