Investing In Precious Metals

Understand What You Are Investing In

First of all, no matter what type of investment vehicle you are opting for, you need to know the industry and sovereign fundamentals. Industry fundamentals means that you have to analyze the gold and silver industry, including supply and demand, market sentiment and so on and so forth. However, the state of the global economy can have a significant impact on the price of precious metals, which is why you should be looking at sovereign fundamentals as well.

Sovereign fundamentals have more to do with precious metals and currency. Basically, you are analyzing the financial statements of the major economies in the world. The higher the chances of further quantitative easing being required, for example, the better the chance of the price of gold and silver going up as investors tum to these precious metals as a hedge.

The idea is that the better your understanding of the movements in price of gold and silver, the easier it will be for you to make the right call, especially since all investment vehicles for these precious metals are driven, at least in part, by the price of the underlying asset.

Besides fundamentals, you also need to look at the technicaldata of the gold, silver and currencies. This is because fundamental data will signal the existence or lack of an opportunity but technical data provides you with the timing. Technical analysis will allow you to pick the right moment to enter the market to ensure you get the maximum benefit from your investment. This applies no matter what your objective is because even if you simply want to purchase gold, for example, as a hedge, if the price is too high, you won’t be able to hedge anything. So, timing is critical.

Make a Plan

You need to build an investment plan, no matter what type of investment you are making. However, with the numerous options available when it comes to precious metals, this is even more important. You need to decide what types of investment vehicles you will be using to gain exposure to precious metals and these depend mainly on your objectives.

For example, if your main goal is to purchase gold and silver as a hedge, then you will probably want to look towards purchasing the physical metal, either directly and taking delivery or via an ETF or Gold Pool Account.

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