Metal is an interesting raw material as it is possible to invest in it both in the form of securities and in physical form. It can be difficult for the private investor to store 70 barrels of crude oil or a ton of soybeans in the backyard, but metal, and especially precious metal, is excellent to have in your own custody at the same time as you can reach significant values.
Many people mistakenly believe that it is only possible to invest in precious metals such as gold or silver. This misconception is probably due to the fact that previously it was only possible to invest in metal in physical form.
In order not to be too demanding to store, they chose to invest in precious metal that is valuable even in small quantities.
So, how do you invest in metal?
Investing in metals in general and base metals in particular is not very difficult. However, it is seldom about really physically buying the metals and storing them at home, with a few exceptions, such as gold.
Although it is also risky if it is a little larger quantities. Instead, it is more often about investing in securities. These securities then have the same value as the metal to which they are attached, but take up significantly less space.
For those who invest in non-precious metals, such as base metals, it is by far the most practical way to invest, and the most common.
To think of
The truth is, however, that it is possible to invest in many different metals. Some of them traditionally act as “hedges” or insurance in an investment portfolio.
You simply have a base of precious metal to make sure that the portfolio can never be completely useless. This base usually makes up between 10% and 25% of the total value, and generally consists of gold and silver.
In addition to the precious metal used as a hedge in the portfolio, a diversified investor can also invest in base metal, or industrial metal as it can also be called.
As these metals are widely used in industry, their value often follows the economy quite well.
During a boom, the industry often shouts for copper, for example, which causes the price to rise. When the recession then comes, demand and the price with it fall.
There are also many different ways to invest in metal. The most common are investments in securities linked to the underlying metal, but the purchase of physical metal is becoming more and more common.
Then it is mainly purchases of gold, silver and platinum that dominate, but copper has also begun to find its way into portfolios as a form of “lower denomination” and spice.
However, trading in securities is still the most common and easiest way to invest in metals.
Many believe that both the gold and especially the silver markets are severely overworked: if everyone who owns, for example, a silver certificate (which is a promissory note with silver as redemption) would want to redeem their papers, the silver market would crash: there is simply more silver on paper than that exists in reality.
Mixing your investment in securities with investing in physical metal can therefore be a wise precaution.
My top 2 ways on how to invest in metal:
1. To invest by buying metals
As already pointed out, it is unusual to invest in metals by physically buying them. The exceptions are then mainly precious metals such as gold, silver and platinum, where there are no major problems with buying the metals and storing them at home.
However, it is not something most people do, but most of the gold and silver out in the cottages are probably ornaments.
When you try to sell such things, however, it is common that you only get the pure gold price, and the items are “destroyed” to take advantage of the gold.
Which is a waste, so it’s not a particularly good way to invest in metals.
2. To invest through securities
Securities linked to the value of a metal are then a much straighter way of investing in metals. In practical terms, this is the same as buying a certain amount of, for example, copper or aluminum.
Then it works much as if you have invested in a share: if the price goes up, the security becomes worth more and vice versa.
One difference, then, is that there is a bit more of a security in investing in metals: it is, in part, safer.
Companies can crash completely, and even shares become worthless, but the same is much more unlikely when it comes to, for example, copper, gold or aluminum.
How much to invest in metals?
There are people who claim that it is much better to invest in metals than in stocks, as metals are more durable. The stock market can crash, which also happens from time to time, while the prices of metals are a little more stable.
Gold is gold, even if the stock market causes one’s shareholding to lose half its value.
It is a point of view that has its points, but which is exaggerated. The stock market has, so far, always recovered, even if it has taken a few years.
Metals are metals and metal is metal. As a side track, it may be worth mentioning that the Swedish company Metal, which among other things uses Ozzy Osbourne as an ambassador, was started in 2017.
However, Metal is not in the metal industry as they are a so-called online casino.
Gold has been a safe and stable investment for many years. If you look at the graph of gold theen you can see that the share price for gold from 2009–2018.
Since the loss that occurred in 2013, the share price for gold has been relatively stable.
In September 2012, the price of gold was at a record high of 1767.7, so those who bought shares in gold before 2008 could make a real dent in the sale in 2012.
If you want to make a lot of money on shares, gold is currently not a metal that can generate such a large development, but if you have money you want to invest for a safe investment, it can be a good idea.
Having securities for metals and not just shares in your portfolio means that you have a certain amount of insurance. The metal investments mean that you have a foundation to stand on, which is more stable than investing in risky shares.
Having a portfolio with a base of 10 to 30% investment in metals is therefore something that can be a good idea.
But, shares are also something that can increase a lot in value, double, triple or more, which is desirable. This is something that rarely or never happens with metals, so for those who want a good return, it is best to also invest in shares, together with metals.
Investing in physical metal
Investing in physical metal is mainly about investing in precious metals. One should know that investment gold is VAT-exempt in Sweden today, which means that it is possible to get very close to the prices that exist in the securities or “spot” market.
For other metals, the spot price differs differently from the price of a ingot, what is reasonable is often up to the market.
Spot price means what you have to pay to get a delivery today (“on the spot”), as opposed to a forward price which is the price for delivery in the future.
Gold, silver and platinum, but also copper, can be traded for investment purposes. Ewes and coins from 1 gr and up, with 1 oz or troy ounce as it is actually called, are usually important base weights. 1 oz corresponds to 31.1 gr.
15-20 years ago, investing in metal and raw materials in general was basically a closed world for private individuals without much money.
Today, the situation is different, thanks in large part to online brokers and small banks that challenge the large banks with a new range and opportunities to invest in various securities and instruments.
The opportunities are great for those who read on and know what they are doing!