Which Precious Metal Should I Buy, & Why?

One of the most common questions I get from clients, is “which Precious Metal(s) should I buy, and why? I have several strategies, with guidelines to answer this question. Let’s examine how this works! Gold, silver, and platinum are currently cheap, while palladium has been up-trending. I want you to buy your assets cheap, which is the main reason for only discussing three, out of the four metals we offer at Worldwide Precious Metals.

The Guidelines

There are different reasons for owning gold, platinum, and silver. I broadly describe the four metals we offer as follows:

  • Down-market metals: gold and silver
    • Gold and silver have a tendency of appreciating in value when overall markets perform poorly.
  • Pro-market metals: platinum and palladium
    • Platinum and palladium tend to appreciate when markets do well, and they also tend to crash when the stock market crashes. Both platinum and palladium crashed in 2008-2009 when the stock market crashed!

If you are worried about the stock market or housing market crashing, you buy gold or silver. If you believe these markets will continue to rally, you buy platinum or palladium. In the current market environment, platinum is heavily discounted relative to palladium, which makes it a more promising long-term investment. If you are unsure of what will happen, and when, you buy a mix of each!

Here are some strategies and fundamental reasons for owning gold, silver, & platinum:

If you are seeking a store of value, or a very stable asset over the long-term, defined in this instance as 20 years or longer, you buy gold! Gold beats most other assets (such as the S&P 500) over long periods of time! It is also not very volatile! It has a long-term uptrend, and historically, when it goes down, it doesn’t go down that much on a percentage basis! During the last bull run, gold rallied from about $300.00/ounce to 1,900.00/ounce. When it adjusted to its new high-low in 2011, it has been range bound between $1,100.00-$1,400.00/ounce. This is hardly a wipe-out! Recently, gold has risen above $1,500/ounce, and has commenced its’ bull run!

Capital Gains

If you are seeking a great investment to buy low, and sell high, silver and platinum are excellent choices.

The Case for Silver

Silver rallied from roughly 5.00/ounce in 2004 to nearly 50.00/ounce in 2011! That represents about 1,000% return on investment! History has a tendency of repeating itself, and it is within the realm of possibility the silver repeats this type of performance during the next bull run in silver! Of course, like any other investment, there are no guarantees of this! Silver is currently range-bound between $14.00-$20.00 USD/ounce.

A good strategy and a case for silver, is to be heavily weighted in silver, and to use the higher rate of return from silver to purchase more gold with the profits from silver at the end of the next silver bull run. 

The Case for Platinum

Platinum rallied from about $400.00/ounce in 2002 to $2,100/ounce in 2008, before it crashed (about a 425% return on investment). The good news is platinum is at its’ 2008 low and is range bound between $800-$1,200/ounce. Platinum is also historically more expensive than gold, and currently, it is about $600.00 cheaper than gold per ounce.

  • If I like capital gains, should I buy platinum or silver? This depends on a few factors:
    • If you believe the stock market will crash in the next few years, you may then consider a silver buy.
    • If you believe the stock market will continue its’ bull run, you may like to consider a platinum buy.

If you are unsure of what direction the stock market will go in in the future, consider having a diverse portfolio and acquire both silver and platinum, as well as gold. Gold’s lack of volatility will stabilize your precious metals’ portfolio!

Breaking it All Down!

Hopefully, this information has helped you narrow down which precious metals you would like in your own portfolio. Simply stated, you buy gold and silver if you think markets will be crashing. You buy platinum (and palladium) if you think the stock market will continue its’ bull run! For capital gains, silver is the most promising asset in the current market environment, if you believe markets will crash in the near future. Both silver and platinum are extremely under-valued, which makes for a great investment opportunity. Gold is a stable asset and can stabilize one’s portfolio, whether it consists of other assets like stock or real estate, or other precious metals. Gold is an excellent store of value and will maintain your purchasing power over long periods of time.

Whatever asset you choose to buy – I want you to buy it cheap in order to maximize your potential gains/purchasing power and reduce your risk! Buying stocks presently is very risky, as it is extremely difficult to find undervalued stocks in the current market environment. If the stock market crashes in the near future, it is very likely that you will see your portfolio drop by 50% or more! In contrast, gold, silver, and platinum are all cheap right now! You’d be hard-pressed to find a better opportunity in the current market environment! I want you to buy assets BEFORE they are in a bubble! In the present market environment, there is more upside than downside, whereas, in a bubble context, like the stock market presently, there is more downside than upside!

By Shawn Sklar, Broker and Contributor at Worldwide Precious Metals