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👋🏼 everyone,

Two things happened that inspired this investing idea deep dive. Firstly, I stumbled across this excellent interview with Larry McDonald where he talks about why he thinks inflation isn't going anywhere (I really hope he’s wrong, btw) and why he thinks hard assets will become more valuable.

Then I had a conversation with a friend who admitted that she wouldn't even know where to start if she wanted to buy gold.

And that got me thinking - we've all been so caught up in tech stocks like Apple, Microsoft and Nvidia that we're in danger of missing out on the whole world of physical assets.

So in this guide, I'll be covering:

• The basics: what is a precious metal 🧐
• Why do people invest in precious metals? 👀
• How to get started - 5 ways to invest in gold, silver and other precious metals 👩‍💻
• The best resources to learn more about precious metals 💼
• Gold vs Bitcoin as a store of value 🤑

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And if that’s not enough to pique your interest, here’s a snapshot of the price of gold over the last few decades. Note: the recent surge which has taken gold to record highs!

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Precious metals, what are they anyway?

Precious metals are rare metals that have high economic value because they're used in various industries and investments.

Think of metals like gold, silver, platinum, and palladium.

They're shiny, durable, and don't corrode easily, making them valuable for making jewelry, electronics, and even in some medical applications.

People invest in them because they're considered a store of value, meaning they hold their worth over time, even if currencies fluctuate. So, they're kind of like a universal currency that people trust and value…more on that below.

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Why do people invest in precious metals? 👀

Precious metals are traditionally a hedge against some combination of volatility in other assets e.g. stock market or real estate and inflation (which would devalue cash holdings).

They don't have a built-in expected gain (like stocks where you gain from the profits of a successful company, or bonds where you gain from interest, or real estate where you gain from rent).

However, they generally maintain a stable value, albeit not always consistently.

That traditional function isn't really intended to be foolproof against extreme scenarios like societal collapse - in that event we'll probably (just a hunch) have other pressing concerns dictating what we find valuable - rather than still having a fondness for relatively useless metals.

Nevertheless gold was considered valuable for a long time before the modern period - way before the invention of stock markets. So it's not impossible that the same factors that made some metals like gold a good commodity to use as money in the first place (it's durable, divisible, uniform, portable and known to be rare) will eventually reassert themselves.

Maybe not in the midst of utter chaos, but these intrinsic qualities could resurface in the aftermath.

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How to invest - 5 ways to invest in gold, silver and other precious metals

If you’re interested in learning more about how to potentially invest in precious metals then here’s five ways to consider:

1. You can buy bullion

bullion is basically physical gold and silver and other precious metals of high purity (they are valued for their metal content rather than their rarity) that is often kept in the form of bars, ingots, or coins. For newbies, this might sound a bit Harry Potter and the Philosopher’s Stone but it’s true.

Quick fact: approx 20% of mined gold is held by central banks worldwide.

Below is a 📸 taken by a reporter when touring Portugal’s Central Bank’s vaults.

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A quick bit of browsing online and you’ll come across lots of bullion dealers. There are many specialized online gold/silver dealers with expertise and occasionally very low prices.

APMEX, JM Bullion and Miles Franklin are well known places you could get started. Once you buy the gold, you can store it yourself.

Also here’s some tips re. how to tell if gold is real or [silver is real](https://stonexbullion.com/en/blog/how-to-spot-fake-silver/#:~:text=Test 1%3A The ice cube,ice should start melting quickly.).

2. You can buy precious metals stored in vaults but allocated to you

Allocated precious metals are owned outright by an investor and they’re stored, under a safekeeping or custody arrangement, in a professional bullion vault. It is the property of the investor.

Here’s one example vault storage provider - there’s plenty of upsides; security, some vaults have insurance so you’d be protected and just general peace of mind knowing you don’t have gold stashed under the cupboard in your staircase. Downsides: you’ve got to watch out for fees!

3. You can buy precious metals ETFs (exchange traded fund) via your stock broker

Precious metals exchange-traded funds (ETFs) hold assets like gold, silver, and platinum and sell shares in their portfolios. Those who invest in a precious metals ETF are exposed to the price changes of these metals without having to own and physically hold them.

Here’s a list of available gold, silver and platinum ETFs to get you started.

4. You can buy shares of precious metal companies

Broadly speaking, there are four types of companies involved in the precious metals ecosystem and four areas of activities:

1. exploration and development 🔭
2. mining and production (M&P) ⛏️
3. extraction, refining, investments, royalty, and streaming 🏗️
4. equipment and services ⚙️

For example, here's a full list of precious metals stocks traded on the NYSE.

🔮 5. Buying futures

In simple terms this means making a financial agreement to buy a specific amount of a precious metal, let’s say gold as an example, at a predetermined price on a future date. It's a way for investors to speculate on the future price of gold without actually owning physical gold.

To do this, you’d want to firstly understand how future contracts works and the risks involved, but that’s a whole other topic which I promise I will cover in an upcoming newsletter!

The best resources to learn more about precious metals

• Silver Stock Investor, Peter Krauth - excellent read and covers all aspects of silver investing
• Tavi Costa, Macro Strategist, with a deep focus on all things metals - here’s his instagram account
• Gold Weekly- weekly topical newsletter with the latest happenings in the world of gold

Gold vs Bitcoin as a store of value

Finally, there's an ongoing debate about whether people should hold bitcoin or gold as a store of value if they had to choose.

Anyone who claims to be 'sure' which is the better choice is almost certainly lying or deluding themselves, because frankly it's anyone's guess.

But to help you think about it, here are some of my thoughts (not advice!) on the subject:

Gold is for folks who like…

• An asset with tangible qualities 🪙
• An asset resilient to the loss of electronic data
• 🏦 An asset that central banks hold in enormous amounts (if it's good enough for them...)

Bitcoin is for folks who like…

• The ease and convenience of a digital asset
• An asset supported by a decentralized and permissionless network.
• The potential not only to safeguard your wealth, but also to potentially increase your investment

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Thank you for reading as always. I hope the above helps fill in any gaps you may have had about the wonderful (ish) world of precious metals.

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DISCLAIMER: None of this is financial advice. Finbrain is strictly for educational purposes.

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