There is always a good time to invest in precious metals like gold, silver, platinum, etc. However, in the race to invest in gold and silver, please be mindful of certain business risks. This article will help you understand the top 7 risks of investing in precious metals.
This risk can affect your gold and silver investments just as your other investments like stocks, mutual funds, etc. It is entirely possible that the price at which you buy your metal can change in the future. This may affect the selling price of your yellow metal.
You will find the gold price near 1000 CHF/ oz was around 2010. It zoomed up to 1600+ between 2012 and 2014 and finally settled down to somewhere around 1300 CHF/oz in 2019. As a gold investor, you should be aware of these price surges.
New investors should also consider having a look at the political factors. The top gold producing nations are China, Australia, Russia, the United States, Canada, Peru, and South Africa. What happens if one or more nations in this list face some political turmoil?
While all these nations are politically stable, you should keep a close watch on what is happening there. If there is a cut in gold production because of political instability, your investment might be impacted.
Risk because of Exchange Rate
Investors buy and sell gold in Euro. However, the price of this currency is closely connected to the U.S. dollar. If the latter appreciates, the Euro also climbs up. On the other hand, any depreciation of the dollar will adversely affect the Euro, and hence your gold investment. Therefore, keep an eye on all those factors that affect the U.S dollar.
If you are trading gold and silver online, there is a real risk that your identity can be stolen. Scammers can steal your account credentials like user name and password. When this happens, you might lose all your precious metal investments in a very short time. Unluckily, there’s very little that we can do to retrieve our stolen money. However, the bright side of this issue is that some precious metal traders like Indigo Precious Metals take investor security very seriously.
Changes in Laws and Regulations
Please scan your external environment very carefully. Your government might change rules governing precious metals suddenly, and this can affect your portfolio adversely. If you are a new investor, you might like reading up this article on gold control in Australia.
Changes in Application
Many people buy silver because it is used for making many things. Silver is used in making parts of batteries, electrical equipment, mirrors, light reflectors, and dental implants. If one of these industries shuts or slows down, the global silver market can slow down. The same goes for platinum. If you are considering buying silver or platinum, please scan the performance of the associated industries.
Your gold investments can be affected by the monetary policy of the government. For example, if inflation becomes high because of this policy, gold prices would increase. On the other hand, if inflation is less, people are more likely to buy those instruments that are likely to yield higher returns than gold. Keep a watch on what your Finance Minister and your Central Bank have to say. Their words can affect your gold investment.
To summarize, your precious metal portfolio can be affected by one or several factors working in tandem. That said, investing in precious metals can be one of the best decisions that you can ever make.