With stock markets showing further signs of weakness, and economies around the world falling into recession due to coronavirus-related lockdowns, the likelihood of a financial crisis even more severe than 2008 is growing every day. Many investors are nervous about the status of their investments, particularly those who have benefited the most from the post-2016 stock market bull run. They’re looking for any opportunity they can to safeguard the gains they’ve already made and keep from suffering huge losses.
The financial crisis of 2008 resulted in stock markets losing more than 50% of their value, while many investors suffered losses even worse than that. Investors today remember those losses, and they’re determined not to repeat them.
Investors also remember the performance of precious metals in the aftermath of the 2008 crisis, as metals like gold and silver catapulted to record highs. The question those investors have today is, what is the best metal to invest in right now? Precious metals markets are far different today than they were 10 or 20 years ago, and the number of options available to investors is significantly broader too.
What Are Precious Metals?
Precious metals are rare, naturally occurring metals in the earth’s crust that have high value due to their uses, whether as investments or in industry. Both because of their rarity and their use in coinage, jewelry, and industry, precious metals have values far higher than base metals such as steel and copper.
While everyone is familiar with gold and silver, they often overlook the other precious metals, those in the platinum group: ruthenium, rhodium, palladium, osmium, iridium, and platinum. So what is the best metal to invest in right now? Here are four precious metals IRA options that can give your investment portfolio a boost.
When people think of investing in precious metals, their first thought is always gold. Gold has captured the imaginations of people across the world for millennia, serving as a currency, a store of value, and a highly popular investment asset.
There’s a reason people refer to certain benchmarks as a “gold standard” – because gold is the object against which every other good has always been valued. Gold’s ability to maintain its value over time is legendary. Just look at the difference between a $20 gold piece and its contemporary $20 bill. That $20 bill is still worth $20, while the $20 gold piece will net you over 80 times that much.
But gold isn’t just a source of stability or diversification for an investment portfolio. It’s also a source of potential wealth appreciation. Since the gold window was closed by President Nixon in 1971, gold’s average annualized gains have topped those of the Dow Jones Industrial Average and the S&P 500. Since the beginning of the 21st century, gold has more than doubled the average annualized gains of stock markets. And in the aftermath of the 2008 financial crisis, the price of gold nearly tripled in value.
With stock markets continuing to show signs of weakness and an economy that’s already in recession, it’s no wonder that so many investors are making the move to invest in gold to protect their assets. Those who want to protect their tax-advantaged retirement accounts can even take advantage of a 401(k) to gold IRA rollover to invest in gold.
A gold IRA allows owners of tax-advantaged retirement accounts such as a 401(k), 403(b), TSP, IRA, or similar account to roll over those funds into an IRA that invests in precious metals such as gold. That gold IRA offers the same tax advantages as any conventional IRA, but with the added protection that an investment in physical gold coins or bars can offer.
All that glitters is not gold, as silver investors know well. While silver often plays second fiddle to gold, it’s an important metal in any investor’s portfolio. And during precious metal bull markets, silver’s gains can often outstrip those of gold. After the 2008 crisis, silver quadrupled in price, while gold only tripled.
The silver price and market is different than that of gold because silver is much more heavily used in industry than gold. Roughly half of all demand for silver comes from industry, whether it’s from electronics, dental equipment, or increasingly the solar panel industry.
Industrial demand for silver is forecast to increase in the future, while silver supply has been falling for several years. Because most silver is produced as a byproduct of mining for gold, copper, and other metals, decreases in mining activity for those metals can result in decreased production of silver too. With tightening supply and rising demand, particularly now from investors, the stage is set for a silver price breakout.
Like gold, silver can be invested in through an IRA. A silver IRA allows investors to hold silver in an IRA and enjoy all the same benefits of a tax-advantaged retirement account, while simultaneously investing in physical silver coins or bars.
Platinum is the third-most popular precious metal among investors today. If you’re wondering what the best metal to invest in is, platinum could be right up there.
Platinum’s history isn’t as long as that of gold, although the metal has existed for millennia. But it was only in the 18th century that scientists were first able to separate platinum from the other precious metals with which it was commonly found in mines. The platinum industry took off after that, with the metal’s durability and resistance to corrosion making it a favorite of jewelers, watchmakers, and other industries.
Roughly half of platinum produced today is used in automotive catalytic converters, its primary industrial use. A large portion of platinum is used in jewelry, and the remainder is used for electronics and in various other industries that need platinum’s resistance to corrosion.
Compared to silver and gold, very little platinum is minted into coins and bars, but those coins and bars are available from mints around the world. The platinum price has been more volatile than gold recently, largely due to falling industrial demand from the automotive industry.
Platinum began to be replaced by cheaper palladium in catalytic converters, leading to a fall in the platinum price. And because automakers expect the platinum price to rise in the future, they’re not taking any steps to reverse that substitution today, even though palladium is now far more expensive.
Over 80% of platinum production today comes from South Africa, which may also lead to fears of supply disruption. But that also means that in the event of a disruption, the platinum price should rise significantly. It’s hard to imagine platinum becoming any cheaper than it already is, and years from now investors may look back and kick themselves for not investing in platinum when they had the chance.
Only discovered in the early 19th century, and once of limited use primarily in jewelry, palladium has rocketed in price in recent years. Like its sister, platinum, palladium finds one of its primary uses in the automotive industry in catalytic converters.
Similar to platinum, palladium’s production is concentrated in only a handful of countries. Russia and South Africa are the top two producers, with the US and Canada producing lesser amounts of the metal. Supply disruptions and use by the automotive industry are two major drivers of the palladium price.
Supply disruptions from Russia in the early 2000s caused the palladium price to spike above $1,300 an ounce. But by the time the 2008 financial crisis rolled around, palladium had fallen back down to a few hundred dollars an ounce. Palladium’s lower price vis-a-vis platinum caused numerous auto manufacturers to use it instead of platinum in their catalytic converters. And that increased demand significantly.
Recent supply disruptions have caused the palladium price to skyrocket, reaching over $2,500 at one point in early 2020. And even though the price has fallen back below $2,000, palladium is still more valuable than gold, at least for now.
Auto manufacturers show no signs of abandoning palladium either, as substituting it for platinum isn’t as easy as it sounds. Redesigning catalytic converters takes time and money, and automakers are betting that the price will end up averaging lower over time. But with so much supply dependent on production in Russia and South Africa, and geopolitical squabbles threatening those supplies, their bet on a lower palladium price may end up wrong, to the benefit of those investing in palladium.
Honorable Mention: Rhodium
While the four metals above are the most commonly known precious metals to investors, rhodium deserves an honorable mention. It’s really the only other precious metal for which there is a liquid market, which is again, like platinum and palladium, due to its use in catalytic converters.
About 80% of rhodium is used in the automotive industry and, like platinum, South Africa is the world’s largest producer. That supply issue has led to a number of surges in the rhodium price over the years, with rhodium hitting an all-time of nearly $14,000 in mid-March. And while the price has crashed back down to around $8,000 an ounce, that is still multiples higher than the $625 it was trading for in 2016.
Rhodium doesn’t make the cut when it comes to considering what the best metal to invest in is because of that volatility. Unlike gold and silver, which are relatively stable in price over time and thus benefit investors who want to hold assets for the long-term, rhodium is more an asset suited to speculators. You can make some pretty significant gains, but you can also sustain some pretty severe losses. Rhodium also isn’t readily available in coin or bar form, so investing in it isn’t nearly as easy as the four top precious metals.
Which Precious Metal Is Right for You?
If you want to know what the best metal to invest in is, you’ll have to judge that according to your own retirement goals. For most investors, gold is going to come out on top every single time. It has the most stable price, the best risk to reward ratio, and the best track record of any of the precious metals. For investors who are in it for the long haul and seeking wealth protection for years or decades to come, gold just can’t be matched.
But other investors may decide that they can afford a little more risk. They might like the additional potential upside to an investment in silver, particularly when they see that silver is incredibly undervalued right now. Others may want to put a small percentage of their funds into platinum or palladium, adding even more diversification even though it does increase their risk profile.
At the end of the day, it’s up to you which metal is the best to invest in. With years of experience helping thousands of investors like you, the experts at Goldco are ready to assist you with any questions you have and walk you through the precious metals investment process. If you’re interested in putting precious metals to work in safeguarding your retirement savings, call Goldco today.