Are Physical Precious Metals a Safer Investment than Mining Stocks?

 

It’s tempting to invest in mining stocks. After all, you can earn nice profits when the stocks are performing well. However, there are inherent risks associated with mining company stocks that you should be aware of before investing in them. The other option is physical gold, silver, or any precious metal that’s readily available in physical form. Below, we look at each option to give you a better idea of what to expect for your investment dollars.

Mining Company Stocks

Mining companies face management risks and other issues that can impact stock prices. For instance, one mining company in Brazil had issues with construction cost overruns that impacted stocks. Other mining companies have had issues with labor strikes. Mining companies in Mexico were recently hit with higher tax rates, affecting their ability to pay out stock dividends.

Also, be aware that higher precious metals prices don’t always translate into higher stock prices. A Canadian company that produces platinum group metals (PGMs) recently had its stock prices drop from around $12 per share to .025 cents per share in a span of less than a decade. This price drop had nothing to do with the price of the PGMs. Palladium prices soared during this time from $200 to $900 per ounce. Even today, palladium trades at fairly high rates.

Other mining companies have issues with rock slides or other natural disasters if they don’t have enough insurance to cover such events. There’s also the possibility of mismanagement or high costs associated with operations that affect stock rates.

Physical Precious Metals

The value of physical precious metals like gold and silver is based on the current spot prices. These rates can be affected by economic conditions around the world. Events such as the war between Russia and Ukraine can also impact prices. However, precious metals prices tend to hold their own when economic conditions are impacting stock prices. Stocks may, for instance, plummet during an economic crisis that affects mining operations and costs. However, precious metals tend to be in higher demand when economic conditions aren’t so great.

Buy Physical Precious Metals First

If you do wish to invest in mining company stocks, do your research first. Look for fairly stable companies. You don’t want to invest, for example, in companies that are susceptible to labor shortages or similar issues based on what has happened there in the recent past. Start by investing in precious metals you can physically own, and save your paper investments for later. Once you get used to the ups and downs of the physical precious metals markets, make your initial investments in mining stocks. In other words, after they purchase silver or buy gold bullion, Carlsbad investors have a more solid foundation that lets them dip their toes into buying mining stocks.

If you’re willing to take risks, invest money you can afford to lose in high-risk companies that can pay high returns on your investment if conditions are right. With physical precious metals, keep the following tips in mind:

  • Avoid commemorative, rare, “limited edition,” or “first-strike” coins.
  • Make sure the people you choose to work with are reliable and reputable.
  • Don’t automatically buy the cheapest precious metals (really low prices are usually a red flag)

 

If they’re balancing their investment portfolios and looking for the best place to buy gold bars, Carlsbad residents should reach out to the trustworthy professionals at First National Bullion. We can answer all your questions and help you find the information you need on how gold and other precious metals can figure into your investment planning decisions. Give one of our experienced dealers a call today.

 

The statements made in this blog are opinions, and past performance is not indicative of future returns. Precious metals, like all investments, carry risk. Precious metals and coins may appreciate, depreciate, or stay the same in cash value depending on a variety of factors. First National Bullion does not guarantee, and its website and employees make no representation, that any metals for sale will appreciate sufficiently to earn the customers a profit. The decision to buy, sell, or borrow precious metals and which precious metals to purchase, borrow, or sell are made at the customer’s sole discretion.