Why Investors Are Turning to Precious Metals in 2024: A Smart Move Amid Economic Uncertainty
As we approach the end of 2024, the U.S. economy is still navigating some rocky terrain. Inflation, although lower than its peak, remains at 2.44%. To curb these pressures, the Federal Reserve has kept interest rates high, sitting at 5.25% to 5.50%. In these uncertain times, more and more investors are turning to precious metals, like gold, silver, and platinum, as a safe haven for their money.
This year has been one for the history books for precious metals. Gold prices hit an all-time high of over $2,700 per ounce in October, while silver and platinum have also seen a surge in demand. But why are investors flocking to these assets, and how can they fit into a well-rounded investment strategy? We asked a few financial experts for their take on this growing trend.
Why Investors Are Drawn to Precious Metals
According to Steven Kibbel, a certified financial planner and senior editor at InternationalMoneyTransfer.com, “Precious metals provide a hedge against market volatility, especially when traditional assets are underperforming.” This stability, even in the face of economic turmoil, is a key factor attracting investors to gold, silver, and platinum.
But it’s not just about market uncertainty—there’s a practical side to these metals that makes them even more appealing. David Weild, chairman and CEO of Weild & Co., explains that gold is used in a variety of industries, such as medical technology for non-allergenic implants and aerospace for radiation and heat protection. Silver, on the other hand, is a critical component in solar panels and nuclear reactors, while platinum is in demand across the automotive, jewelry, and oil sectors.
Brett Elliott, director of marketing at the American Precious Metals Exchange (APMEX), adds that these metals offer a lower-risk option compared to other investments. “Gold, in particular, is a safe haven with low risk compared to other derivative investments.”
Key Reasons Precious Metals Are So Attractive Right Now
So, what makes precious metals such an attractive choice for investors right now? Here are three main factors experts are highlighting:
1. A Hedge Against Inflation
With inflation still hovering above the Federal Reserve’s 2% target, many investors are looking for ways to protect their wealth. Precious metals, especially gold, have a long-standing reputation as a hedge against inflation. As Kibbel puts it, “As inflation increases, the value of precious metals tends to hold steady.” This makes them an appealing alternative to traditional, currency-backed investments like stocks or bonds, which can lose value as inflation rises.
2. Portfolio Diversification
Weild also points out that precious metals are considered “inflation-resistant hard assets” that can help diversify a portfolio beyond the usual mix of stocks and bonds. In his view, they should be seen in the same light as real estate or other commodities. By including metals in your investment strategy, you’re adding a layer of protection against volatility in traditional markets.
So, how much should you invest in precious metals? It depends on your risk tolerance and outlook. Weild suggests that, historically, a 5% to 10% allocation to precious metals has been a good target for most investors.
3. Tangible Assets in Uncertain Times
Unlike digital investments that can be impacted by market fluctuations or cybersecurity risks, physical gold and silver offer a sense of stability and security. Kibbel emphasizes the psychological comfort investors feel when they own tangible assets like gold. “Investors have more control over their assets when they own actual metals, which can be handled and stored, as opposed to stocks or digital assets,” he explains. During times of market turbulence, knowing that your physical gold or silver is safe and holds its value can bring a sense of peace.
How to Start Investing in Precious Metals
If you’re considering adding precious metals to your portfolio, you have a few options. Each comes with its own set of pros and cons, depending on your investment goals and risk profile.
1. Physical Metals
One option is to buy actual platinum, silver, or gold bars and coins. This method offers safety, as physical gold carries no contractual risk, according to Elliott. However, storing your metals securely and ensuring they’re properly insured can be a challenge, and they might be less liquid than other investment options.
2. Exchange-Traded Funds (ETFs)
If you’re not keen on holding physical metals, ETFs are a great alternative. These funds track the price of precious metals, giving you exposure without the need to store the physical asset. Kibbel notes that ETFs offer liquidity and convenience, but you won’t actually own the physical metal. This can be ideal if you’re looking for a more flexible, short-term investment.
3. Mining Stocks
Another way to invest in precious metals is by buying stocks in companies that mine them. While mining stocks can offer high rewards, they’re also more volatile and subject to a wider range of risks. As Kibbel cautions, the performance of mining stocks depends not just on the price of the metals, but on the success of the company itself.
The Bottom Line
While the future of the economy remains uncertain, experts agree that now might be an opportune time to invest in precious metals, especially gold. If you’re considering adding these assets to your portfolio, make sure your approach aligns with your overall financial strategy and risk tolerance.
Before diving in, it’s always wise to do your research and consult with a financial advisor. They can help you assess whether precious metals are the right fit for your portfolio and how much exposure makes sense given the current economic climate.
With inflation, market volatility, and geopolitical tensions on the rise, precious metals may provide just the kind of stability investors need. Whether you opt for physical metals, ETFs, or mining stocks, diversifying with precious metals could be a smart move as we head into 2025.