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Degree of Risk Investing in Gold and Silver

Precious Metals are an essential component of any healthy portfolio. They help diversify your investments and can be an excellent way to preserve wealth. There is a degree of risk in every investment and Precious Metals are no exception. However, the best reason to buy Precious Metals, such as Gold, Silver, Platinum and Palladium, is for hedging inflation. 

Trading Gold and Silver

Centuries before the invention of government-sponsored paper currency, Precious Metals served as the primary means of trade. Instead of exchanging only goods for goods and services for services, buyers and sellers decided that Precious Metals should be accepted as trade, effectively introducing the concept of money. Money only retains value if it is limited or scarce. While paper money is created by governments at will, Gold and Silver tend to maintain or increase in value because they cannot be manufactured. Precious Metals are extracted from the Earth so the supply will always be finite, meaning governments and central banks cannot increase the number of units in circulation by merely printing more. 

Hedging Precious Metals

Hedging is the practice of limiting the risk of current investments by engaging in a diverse set of investments. Taking out an insurance policy is often mentioned as an everyday example of a hedge. If you have invested in a company that you believe in, but it presents a high-level of financial risk, you could make a smaller investment in their biggest competitor to hedge your investment against too much loss. 

Inflation occurs when too much money is created and becomes devalued. It has been the cause of many financial collapses since governments stopped adhering to the Gold Standard. While the current financial climate in the U.S. is unstable, buying Precious Metals serves as an essential component for hedging in the economy. Gold and Silver do not tend to be profoundly affected by inflation and are known to retain their value even in a currency collapse. Some economists have predicted that as paper currencies around the world continue to lose their value, secure forms of hedging against inflation, such as Precious Metals investments, will prove to be a necessary practice for consumers and their portfolios. 

Diversify your portfolio with Precious Metals

Recent years have shown that investors who buy Precious Metals as a part of their overall portfolio tend to see a boost in returns over time. Even novice investors should know that if you are not hedging, you are not investing intelligently. While not the only way to hedge against inflation, investments in Precious Metals such as Silver and Gold have, for centuries, proven to be a rewarding financial tool.

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