Hi everyone. Here is a post about investing in precious metals. Again here is the disclaimer. The information in my post should not be considered investing advice. Please contact a licensed professional before investing in precious metals. Also please do thorough research on how and where to buy precious metals because there are a lot of scams out there.

I remember when I was a kid, my parents used to buy a little bit of gold at every religious event or festival. India and many other Asian countries are the biggest consumers of gold. In addition to investing in stocks and other assets, experts recommend investing in precious metals. The reason is that the precious metals are used as a hedge against bad economic times. That means when the economy is bad, price of precious metals goes up. I don’t know if many people know this but until the 1970’s the US dollar was backed by solid deposits of gold stored at Fort Knox, Kentucky. But in the 1970’s President Nixon took the US off the gold standard. Now the US dollar is backed by the good faith in the US. Getting back to precious metals being a hedge, conversely when the economy is good, the price of gold goes down. But this is when smart investors use dollar cost averaging to buy more gold. Dollar cost averaging means you invest a fixed amount of money into some asset regardless of the price. So for example let us say that price of gold is $1000 an ounce. Say you invest $1000 every month, you will buy an ounce of gold every month. Say the economy worsens and the price of gold goes up to $1500 an ounce. That month you will buy 2/3 ounce. Finally if the economy improves and the price of gold goes down to $500, you will buy 2 ounces. But for the whole year you will have paid an average price of $1000 per ounce. Now this is a very simple illustration, but I hope you get the idea. So price of precious metals is inversely proportional to the economy. These metals are called precious metals because they are rare and extracting them in pure form requires a lot of work. So rarer the metal, the harder it is to extract in pure form and the higher the price. The three precious metals usually invested in consist of silver, gold and platinum. Obviously silver is more abundant, so it is cheaper. It is also used in many industrial applications. So it is consumed faster. Gold is not as abundant as silver, but more abundant than platinum. So they are priced accordingly.

Anyway, my point is if you are investing in assets, consider precious metals. It will help you diversify. Also make sure that you invest in physical metal like gold bullion and not gold company stocks. Do your research before investing and buy from reputable dealers.