Why Invest In Silver

Since the beginning of time, precious metals have been valued by society. Today, their popularity endures, and they have a new role in the savvy investor’s portfolio too.

However, the majority of people, traders included, lack any real knowledge of the precious metals market. Keep reading to learn more…

Precious Metals

The precious metals market determines the value of gold, and it changes from day to day. Its price is largely impervious to the rules of supply and demand; instead, it is influenced by sentiment. This unique phenomenon is due to the imbalance between new mine supply and existing hoarded gold, with the latter far outweighing the former. Thus, when those in possession of gold want to sell, the price drops; when people want to buy, new supply is quickly snapped up and prices rise.

The desire to hoard gold is usually triggered by one of several factors:

• Systemic financial concerns
• A perceived instability of the banks or political system
• Negative inflation
• War. political crises or political upheaval.

Silver

Unlike gold, the price of silver is determined by its usage as an industrial metal and its perceived role as a store of value. It is much more volatile than its sister metal: whilst their prices tend to rise in line with each other as an item to be hoarded, the price of silver is also affected by the industrial hunger for it and the mechanisms of supply and demand. This saw it rise, for example, when it became increasingly predominant in the photography industry as a component in photographic film.

Platinum

Like gold and silver, platinum can be traded on global commodities markets. Its price is determined by:

• Its rarity (in times of stability)
• Its use in industry
• Auto sales and production numbers
• Action from cartels in South Africa and Russia where mines are sited.

These factors make platinum the most volatile of the precious metals.

Ways to Invest in Precious Metals

There are multiple ways in which traders can invest in precious metals…

Commodity ETFs

Exchange traded funds are available for all three precious metals, although platinum can only be traded on the London Stock Exchange through brokers like Sucden Financial .

Common Stocks and Mutual Funds

CFMSs involve shares in precious metal mining entities being leveraged against price movements for those metals. This is a very complicated means of investment, and should only really be attempted by those who know how mining stock valuations are calculated, or those willing to pay for fund managers with a solid record of performance.

Futures and Options

Futures and options markets can be a wise choice for those who are willing to make big bets on metals. This method of investment poses the potential for the greatest profits and losses in the precious metals market.

Precious metals are one way for investors to diversify their portfolio. but this market is not for the inexperienced or risk averse; its volatility means that there are as many disasters as there are success stories. If you do decide to invest, make sure that you go in with your eyes wide open.

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