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For perfect diversification: also invest in precious metals

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Gold and silver have been coveted investment opportunities for decades. They not only serve as a financial reserve in the safe, but can also be worn as a piece of jewelry. Experts even recommend not only investing in funds, securities or other derivatives. Instead, it is advisable to increase diversification and also consider buying physical precious metals. This article shows how this crisis-proof form of investment works.

Good reasons to invest in precious metals

Coins, pieces of jewelry or even bars — gold, silver and co. lie dormant in millions of households, often well hidden. For secure precious metal storage, many owners opt for a safe, which is often integrated into a cabinet. This is where particularly valuable items are stored. In recent years, the sales figures for physical gold in particular have risen. One reason is the supposedly good feeling that the precious metal provides as a safe haven in the event of currency instability.

Experts welcome these decisions, as the precious metal is a genuine tangible asset with its own intrinsic value and has no virtual claims without intrinsic value, such as shares. The future of precious metals is also secure, as gold, silver and co. are important components in consumer goods. Solar cells, catalytic converters, mobile phones, wind turbines and much more would not work without them.

Scarce resources are gradually driving prices upwards

To date, around 25 % of all global gold and silver deposits remain untouched. Assuming an annual production volume of 3200 tonnes, the gold reserves would therefore last for around 16 years and the silver reserves for around 27 years. This already shows what guarantees an increase in the value of precious metals: Deposits are limited. The fewer there are, the higher the price will be in the future.

Anyone deciding to invest in precious metals should do the same as when buying securities or investing in a fund: first compare the figures. Economic and geopolitical events also influence the price of precious metals. Especially when inflation rises, supposedly safe and stable investment opportunities are in demand. However, those who invest at the wrong time pay too much and consequently take longer to amortize their investment (when selling later). As soon as the price of gold or silver is on a downward trend, investors should strike. However, if the price spiral is in an upward trend, a little more patience is required. It is well known that after every trend high comes a low.

Possible return on precious metals based on the price trend

A look at the real prices of gold, silver, platinum and palladium clearly shows that an investment pays off. On 1 January 2010, the price of gold was €761, silver €12, platinum €1,020 and palladium €274. Ten years later, on 1 January 2020, the enormous increase in value became apparent. The price of gold was €1,367, silver €16, platinum €882 and palladium €1,738. This example clearly shows how quickly an increase can be achieved and also demonstrates the importance of a correct investment approach. Platinum, for example, has lost 13.53 % due to the fall in prices. If investors had waited for a more favorable purchase price or a better selling price, the result would probably have been much better. Gold has increased in value by more than 79 % over the last ten years.

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