valuable commodities (e.g., gold and silver) representing a private store of value. Precious metals are liquid, have international markets, and provide a hedge against inflation, currency risk, and unfavorable political and economic developments. However, they are a volatile investment. Their prices typically increase in difficult periods and decline in good times. Precious metals usually go in the opposite direction of common stock; as common stock returns move down, returns on gold move up. Tax must be paid on the gain when sold. Precious metal ownership has several disadvantages including high storage cost, high transaction cost, and no annual dividend revenue.
gold, silver, platinum, and palladium. These metals are valued for their intrinsic value, backing world currencies, as well as their beauty or industrial applications. Fundamental issues of supply and demand are important factors in their prices, along with political and economic considerations, especially when producing countries are involved. Inflation fears will stimulate gold accumulation and higher prices, as will war and natural disaster, especially in major producing or consuming countries or regions.
gold, silver, platinum, and palladium. These metals are valued for their intrinsic value, backing world currencies, as well as their industrial applications. Fundamental issues of supply and demand are important factors in their prices, along with political and economic considerations, especially when producing countries are involved. Inflation fears will stimulate gold accumulation and higher prices, as will war and natural disaster, especially in major producing or consuming countries or regions. Precious metals are held by central banks and are considered a storehouse of value. While gold is often singled out, cultural factors assign different levels of significance to the metals. In the Far East, especially Japan, platinum traditionally is held in higher regard than gold, both in terms of physical metal and investment holdings, and for personal accumulation (e.g., jewelry and coins). Gold is favored in the West. In India and the Middle East, silver is highly prized, and the dowries of Indian women are replete with silver jewelry and coins. Investors can buy physical metal in bars, bullion and numismatic coins, and jewelry. There are numerous investment vehicles that do not involve physical delivery: futures and options contracts, mining company stocks, bonds, mutual funds, commodity indices, and commodity funds. The values of these investment vehicles are influenced by metal price volatility, with commodity funds and indices, and futures and options, more sensitive to daily price swings. Many metals analysts and advisors recommend that 5% to 15% of investor portfolios be held in some form of precious metals as a long-term hedge against inflation and political turmoil.
