There is a constant demand for precious metals, as they are considerably safe and valuable. Compared to real estate, they provide security for investors looking to generate steady returns over a given period. However, similar to other investments, you should know the risks involved. Below are a few challenges that come with buying precious metals.
1. Storage Issues
Besides finding the safest way to buy gold and other precious metals, you should research extensively how to store your valuables. You should find a reliable storage solution for your precious metals to avoid the risk of theft or loss. Storage solutions for precious metals include:
- Secretive storage
Secretive storage is the simplest and least expensive storage option for gold and silver. The secretive storage option is ideal for customers with small to medium-sized collections. As the name suggests, this simply means finding a secure hiding spot in your property to store your valuables. Secretive storage has no storage fees and provides instant access. However, you risk damaging your metals, which decreases their value. This option is also prone to theft, especially if you disclose it to a third party
- Precious metals depositories
Precious metal depositories are climate and moisture-controlled facilities that provide storage solutions for large collections of gold and silver. These heavily guarded facilities are under 24/7 surveillance. Besides ensuring your valuables are safe from detrimental environmental conditions, you’ll be sure of your valuables’ physical safety.
- Banks
Customers with considerable investments should opt for banks to sort their store needs. Storing gold and silver in banks relieves you of the responsibility of guarding your valuables. You can keep them in the bank’s vault or safety deposit box. However, storing your precious metals in the bank attracts storage fees and limits access.
2. The Costs
Like any investment, buying gold, silver, and other precious metals entails a commission. Unfortunately, these commissions are higher than buying stocks or bonds. Premiums for buying precious metals are dynamic and fluctuate according to market conditions and the dealers involved. For starters, buying coins of precious metals is more expensive than bars because of their intricate design.
Similarly, online dealers of precious metals are less expensive than local coin shops, even with shipping fees included. Online platforms also have a wide selection.
3. Liquidity
Liquidity is probably the most common and substantial risk associated with most investments. Liquidity risks essentially refer to the uncertainty that you won’t be able to dispose of your bought assets within a short time. While liquidity risks affect all markets, it applies differently to precious metals.
Precious metals can’t be liquidated immediately. While gold and silver are approved legal tenders in some states, you can’t make random purchases using gold coins or bars. You should convert them first into common currencies.
Endnote
Investing in precious metals shouldn’t necessarily be challenging. You need to identify the best-performing asset, evaluate the risks, and make the purchase. Just like stocks and bonds, doing this alone might seem challenging, making it prudent to consult professionals. You should also be wary of the various challenges before staking your money on these metals.
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin