Why consider a precious metal investment?
Precious metals are one of the oldest assets in which you can invest. The most famous, gold and silver, have been money for thousands of years. Investing in precious metals is still attractive, and the demand for these is increasing more as they are used to a greater extent to create new technology. What makes precious metals interesting is that they have unique properties that no other element has. It is these properties that have made them suitable to be used as money for thousands of years. Their unique properties also make them essential components in products such as solar cells and mobile phones.
Below we will go into more detail about why you should consider a precious metal investment. The following questions will be answered:
- What are precious metals?
- Why invest in precious metals?
- How to invest in precious metals?
What are precious metals?
Precious metals are among the elements that react very little with their environment compared to other metals. There are eight precious metals where. The most famous are gold, silver, copper, palladium and platinum. In addition to these, ruthenium, rhodium, osmium, and iridium are also classified as precious metals.
Precious metals are unique because of their physical and chemical properties:
- Conductivity: Silver is the element with the best conductivity for both electricity and heat. This makes the metal a critical component in, e.g. batteries, solar cells and electric motors.
- Corrosion: Precious metals, especially gold, are also resistant to corrosion, which means that they are often used in products where it is important to avoid corrosion, in contacts and reflectors.
- Catalyst: Several of the precious metals are used as catalysts. Platinum, Palladium and Rodium are used in car catalysts to purify the exhaust gases from the internal combustion engine.
Why invest in precious metals?
A precious metal investment brings multiple benefits to a portfolio:
- Low correlation - The price of the metals is uncorrelated to the broad stock market, which means that they act as a protection in the portfolio. Having several uncorrelated assets contributes to a higher risk-adjusted return.
- Inflation protection – precious metals tend to perform well in times of high uncertainty and rising inflation.
- Green transformation trend exposure - To invest in precious metals also means to invest in the green transformation megatrend. This structural investment trend is making substantial progress as the world adapts to more ambitious climate goals. Precious metals hold unique properties that make them indispensable for producing technology such as electric vehicle batteries, computers, wind and solar power plants.
As with most investments, there are risks involved with a precious metal investment. This text is for educational purposes and is not an investment recommendation.
Different types of precious metals to invest in
Read more about investing in precious metals and other types of metals by following the links below:
Benefits of investing in precious metal funds
By investing in precious metal funds, you get:
- Expert knowledge - A fund manager selects the best holdings and stays updated with the current investment environment.
- Risk diversification - a broad exposure to the precious metals universe. A fund often includes 25+ holdings which can be difficult and expensive for individual investors to manage.
Funds can be either daily traded or exchange-traded through an ETF.
How investing in precious metals work
There are several different ways to invest in precious metals:
- Physical: You can buy precious metals directly and own the physical raw material.
- ETCs (Exchange Traded Commodities): By buying an ETC, you can get exposure to the physical commodity without having to sort storage for the metal yourself.
- Derivatives: A precious metal investment that follows the price of precious metals but where you have a counterparty risk against the product’s issuer.
- Shares: The share price of the mining companies that extract precious metals is strongly linked to the spot price. Mining company shares often move more than the underlying asset price because you also add a company risk. This means that the stock price increases more when, e.g., the spot price goes up, and vice versa.
- Precious metal funds: There are different types of funds. When you invest in a fund, you pay a fee for an expert (fund manager) to select the underlying assets that provide exposure to precious metals. A fund may include any of the options listed above. There are two types of funds:
- Daily traded fund: Often actively managed, an expert reviews the holdings and rebalances at regular intervals.
- Exchange-Traded Fund: A basket of securities that follows an index and is traded like a stock.
Why invest in precious metals with AuAg Funds?
AuAg Fonder offers funds that invest in precious metals and green tech elements. They have in common that these assets provide protection against monetary inflation and are necessary for the transition to a green world – highly topical trends today.
- AuAg’s funds fit well into a portfolio of traditional assets as they have a low long-term correlation with equities in particular.
- AuAg are investing in precious metals mining companies through the funds AuAg Silver Bullet, and AuAg Gold Mining ETF.
- AuAg has a well-defined investment process to ensure that the companies in the funds’ portfolios work according to a clear sustainability plan. Through a strategic collaboration with Sustainalytics - a world-leading supplier of ESG data - AuAg can ensure that the quality of the data underlying our analysis meets the highest standards.