How to Invest in Gold, Silver, and Other Precious Metals

Are you looking for information on how to protect your portfolio by investing in precious metal commodities like gold and silver? With the United States’ government over $15 trillion in debt, the Federal Reserve printing money like it is going out of style, and 2012 being the year the Mayans predicted the world would end, precious metals have become quite the hot commodity. And like any other investment that has seen rampant price appreciation in a short period of time, many investors are entering the market to get a piece of the action. This along with global economic fear has helped propel precious metal prices up.

Photo by Giorgio Monteforti via Flickr

Are Gold and Silver Good Investments?

With the global economic fears today, many have earned a healthy return on their investment in precious metals. The spot price of an ounce of gold in 2002 averaged  $309.73. Today that same ounce of gold is worth $1,639.34. That’s a return of 429% over a 10 year period. Compared to the S&P 500 returning 12.53% over the same time period (not including dividends) you can see how much better off you would be had you invested in gold 10 years ago.

However, the answer to gold and silver being good investments isn’t that clear. They were great investments if you could put your entire portfolio in them 10 years ago. But now? It is tough to tell whether or not the price of these precious metals will continue to go up at crazy rates of return or if we are nearing the top of a precious metals bubble.

How to Invest in Gold, Silver, and Other Precious Metals

There are several ways you can invest in precious metals, primarily through the purchase of physical amounts of the metal in coin or bar form or through investing in the stock market (you can see more ways to invest in gold here).

Coins

Precious metal coins such as American Silver Eagles, US Mint 24k Gold Buffalos, and American Eagles (Gold) can be purchased through various retailers. These coins are newly minted and contain a specific amount of the precious metal. This makes judging how much money you have invested in the specific metal easy to count: you know how much each coin weighs or how much of the metal is in each coin, and multiply by the current spot price.

There are also antique coins that can be purchased at a discount to the value of the gold, silver, or other precious metal inside the coin. These can be more challenging to find, but you don’t have to buy brand new minted coins to invest in this commodity.

Bullion Bars

Bullion bars, in essence, is taking the number of coins you have a melting them down into one solid bar. Aside from weighing more and having a different amount of precious metal in the bar, there’s not much difference between owning bars and owning coins.

Mutual Funds and ETFs

There are several mutual funds and exchange traded funds (ETFs) specifically targeted at precious metal commodities. These include First Eagle Gold Fund (SGGDX), SPDR Gold Trust (GLD) and iShares Silver Trust (SLV). The funds aim to mimic the return of physical bullion without the need to own a closet full of precious metals.

Individual Companies

Alternatively you can also invest in companies that have something to do with the precious metals industry, e.g., mining companies. You could invest in individual shares of companies that mine for gold, silver, platinum, and other precious metals.

About the Author

By , on Jan 16, 2012
Kevin Mulligan
Kevin Mulligan is a debt reduction champion with a passion for teaching people how to budget and stay out of debt. He's building a personal finance freelance writing career and has written for RothIRA.com, Discover Bank, and many others.

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Leave Your Comment (3 Comments)

  1. Juan says:

    Don’t forget that one can invest directly in gold futures as well [though this requires a bit more capital than that which is required for an etf].

  2. Peter says:

    I think a bit of gold is great as a last “reserve” piece of savings. However I don’t like the idea of investing in a non productive item, that just sits there.

    There are not many ways to add value or find an edge in direct or indirect metal investment. I think you are far more likely to find a great investment in gold mining companies, with a lot of detective work, than the metal itself. That being said, small exploring mining companies are notorious for their volatility. So watch out.

  3. Jonathan says:

    I agree that if you were investing 10 years ago then it would have been an awesome move, but in truth the precious metal bubble will burst in the same way that property etc has. It’s all about identifying new investment opportunities.

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