Buy Silver and Gold Not Physical to Diversify Your Investments

Diversifying your investments is a smart move, and buying silver and gold can be a great way to do it. This is because their value is not directly tied to the stock market, making them a safe-haven asset.

Silver and gold have historically performed well during times of economic uncertainty, such as recessions and inflation. In fact, silver prices have increased by an average of 10% per year over the past decade.

Having a portion of your investments in silver and gold can provide a hedge against market volatility. This is because their value is not directly affected by economic fluctuations.

Investing in silver and gold can also provide a tangible asset that can be easily sold or exchanged for cash.

Investing in precious metals can be done in various ways without physically holding them. You can invest in gold mining stocks, which represent ownership in a gold mining company and allow you to participate in the company’s profits.

There are also mutual funds or exchange-traded funds (ETFs) that invest in gold, allowing you to invest in a diversified portfolio of gold-related assets without directly owning physical gold. These funds can be purchased using traditional brokerage accounts.

Some funds are proxies for direct ownership of silver or gold, holding only bullion of those specific metals, while others cover the sector more broadly with some percentage held in other precious metals. The goal of these funds is to mimic the price movements of a specific precious metals index or a specific metal’s price.

Gold and silver funds can be thought of as an investment in precious metals without the actual hassle of storing, buying, or selling them. The fund structure allows for greater liquidity, meaning you can easily add or subtract from your gold or silver holdings without having to get items verified and physically shipped around the dealer network.

Here are some options for investing in gold without physically holding it:

Gold mining stocks: Represent ownership in a gold mining company and allow you to participate in the company’s profits.Mutual funds or ETFs that invest in gold: Allow you to invest in a diversified portfolio of gold-related assets without directly owning physical gold.Gold-based savings plans or gold receipts: Allow you to invest in gold without physically holding it.Gold futures contracts: Allow you to buy or sell gold at a future date at a predetermined price.Options on gold futures: Give you the right (but not the obligation) to buy or sell gold futures at a predetermined price on or before a certain date.

Mutual funds or ETFs that invest in gold allow you to invest in a diversified portfolio of gold-related assets without directly owning physical gold, but they also carry their own risks, such as market risk and management risk.

If you're not comfortable storing physical gold or silver, there are alternative ways to own these precious metals. You can invest in gold and silver funds, which hold physical bullion but provide greater liquidity.

Some gold and silver funds mimic the price movements of a specific precious metals index or a specific metal's price. The performance of these funds will be reduced by the expense ratio of the fund and the more active a fund's strategy is, the more it will cost.

There are also funds that invest in the stocks of companies mining deposits of precious metals. These funds allow you to participate in the company's profits, but keep in mind that they may not give you direct exposure to gold or silver.

You can also consider gold mining stocks, which represent ownership in a gold mining company. This way, you can participate in the company's profits without having to directly own physical gold.

Here are some options for investing in gold without physically holding it:

Gold mining stocks

Mutual funds or exchange-traded funds (ETFs) that invest in gold

Gold-based savings plans or gold receipts

Gold futures contracts

Options on gold futures

Each of these options has its own risks and considerations, such as market risk and management risk. It's essential to understand the specifics of each option before making a decision.

Physically backed ETFs are a recommended method for getting exposure to gold in a halal manner. They are the easiest and cheapest way to do so, with the lowest expense ratio and over $5b of assets under management.

Silver is also an affordable option, with a price of $31 per ounce compared to gold's $2,000 per ounce. This makes it an attractive choice for investors looking to enter the precious metals market at a lower price point.

You can also consider gold certificates, which represent ownership or a claim on a certain amount of gold or other precious metal. Some examples of gold certificate programs include the Perth Mint's allocated metal option and the Royal Canadian Mint's Canadian Gold Reserves Exchange Traded Receipts (ETRs).

There are platforms that exist to match buyers and sellers of silver and gold, making it easier to get exposure to these precious metals without physically storing them.

These platforms store the silver and gold in a secure vault and allow buyers and sellers to trade that stored metal through their website or app.

For example, BullionVault is a service that does this well, and with lower fees than you'd pay if you were to purchase physical silver and gold from a jeweller.

Silver can be a more accessible option for those who need to free up liquid assets quickly, particularly for everyday spending.

Lower premiums on silver bullion make it a more affordable entry point compared to other precious metals.

You won't pay a raw price or spot price when buying silver bullion, but instead a premium that's lower than gold.

Some platforms allow you to buy and sell gold and other precious metals without physically moving the metal.

These platforms store the gold in a secure vault and facilitate trading through their website or app.

You can take custody of your gold through physical delivery, which is an option offered by some of these services.

I've used a service called BullionVault in the past, which does this well and with lower fees than buying physical gold from a jeweller.

The outlook is looking bright for silver in 2024, thanks to its low gold-silver ratio of 86.

The gold-silver ratio is a key indicator of silver's value, and a ratio above 80 means silver is historically undervalued and due for a rise.

Silver's shiny outlook is a great opportunity for investors to consider adding it to their portfolios.

Historically, a gold-silver ratio above 80 has led to silver prices increasing in the past, making it a potentially savvy investment move.

You can buy silver and gold through financial instruments, which shifts some of the risks to someone else, like storage and insurance.

Some gold and silver funds are proxies for direct ownership, holding only bullion of those specific metals.

These funds mimic the price movements of a specific precious metals index or a specific metal's price.

The performance of these funds is reduced by the expense ratio of the fund, which can be higher for more active strategies.

Gold and silver funds are liquid, allowing you to easily add or subtract from your holdings without physical hassle.

They provide diversification of physical gold or silver without carrying costs, but may not track the exact price of physical gold.

There are also funds that invest in stocks of companies mining precious metals deposits.

These funds offer exposure to physical gold and silver bars with the added benefit of liquidity.

Investing in gold and silver mining stocks can be a viable option for those looking to buy silver and gold without physically holding it.

Gold and silver mining stocks are heavily influenced by the market price of the deposits they are mining, but the connection isn’t always exact.

Miners are judged by the quality of the deposits they’ve assayed and the feasibility of getting the metal out of the ground.

This complex judgment is being recalculated every time the market value of those deposits changes.

Junior mining companies, which are in the development and exploration phase, tend to be more volatile than major mining companies.

Major mining companies are more likely to be in a position to pay dividends and see share price appreciation when metal prices are on an uptrend.

Investors looking to invest in gold and silver mining stocks may be better served by a sector Exchange-Traded Fund (ETF) like the VanEck Gold Miners ETF (DGX) or iShares MSCI Global Silver Miners ETF (SLVP).

Gold mining stocks can offer potential advantages over investing in physical gold, such as leverage and diversification.

However, investing in gold mining stocks carries its own set of risks, including market risk, credit risk, liquidity risk, and management risk.

Here are some key differences between investing in gold mining stocks and physical gold:

Derivatives markets are efficient ways to gain exposure to gold and are generally the most cost-effective. They also provide the greatest degree of leverage.

For the average investor, however, derivatives markets are not accessible. Instead, a typical investor can gain exposure to gold via mutual funds or exchange-traded funds (ETFs) that buy gold, which are traded like shares on stock exchanges.

The SPDR Gold Trust ETF (GLD) is a popular choice; its investment objective is for its shares to reflect the performance of the price of gold bullion.

Exchange Traded Funds (ETFs) are a convenient way for investors to gain exposure to gold. They're traded like shares on stock exchanges.

The SPDR Gold Trust ETF (GLD) is a popular choice, aiming to reflect the performance of the price of gold bullion.

There are also leveraged gold ETFs that provide two-times long exposure, such as ProShares Ultra Gold (UGL), or two-times short exposure, like ProShares UltraShort Gold (GLL).

Derivatives are a key way to gain exposure to gold, and they come in different forms. Forward contracts give the owner the right to buy physical gold at a specified price today.

Futures contracts operate similarly, but they're traded on an exchange and have predetermined terms. This eliminates the credit risk associated with forward contracts.

Call options, on the other hand, give the owner the right but not the obligation to buy gold. The price paid for the option is like a deposit for the right to buy gold at a specified price.

If the price of gold rises above the specified price, the owner of the option makes a profit. The buyer of the option will lose the premium if the price of gold doesn't rise above the strike price.