Ask the Piggy Bank: Investing in Precious Metals
One of the great things about writing a personal finance blog (or any blog for that matter) is that you can take questions that people leave on your comments and turn them into questions you can answer in a post. Here’s an example from Mark at Digital Money World:
Have you ever recommended precious metals as a safe place to store wealth? Gold has done very well in the past 5-6 years and I wonder if any has made its way into your Piggy Bank?
Precious metals are a very interesting place to store wealth. And, because I believe in 
diversification, some of my portfolio does include investing in precious metals. Gold is doing quite well at the moment, especially in the current climate. With the U.S. dollar in doubt, gold is a safe haven investment. It tends to do better when the forex market is in turmoil. And, because investing in precious metals actually lets you invest in something tangible, there is definitely something in it. Another precious metal I would consider for investment is platinum, as it is likely to continue to grow in demand in the coming years (it is used in auto parts, and the Chinese auto industry is poised to really boom).
However, the question, which was asked on my post about safe investments, should also be addressed in that light. Investing in precious metals means a brush with the commodities market, and for some, this is high risk. Commodities are generally quite volatile, going up and down. While gold prices have been doing quite well this past week, we shouldn’t forget the rather precipitous drop not too long ago that had bullion lovers despairing of ever seeing $700 an ounce.
That brings me to the next point. Investing in precious metals can be expensive (gold especially). This means that you have to have some capital to start with, and you also have to be willing to sit on it for a while. If you want you money back in a year, maybe you should try something else. But Mark mentions funds as well, and this is a good point. You don’t have to actually purchase the gold on the commodities market; you can invest in funds that are investing in precious metals. This will allow you to put dollar-cost averaging to work for you, rather than worrying about buying an entire ounce at one time.
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