Asked by Anonymous

Why no one here talks about investments in precious metals? Is it an undervalued commodity?

PMs, particularly gold and silver(most especially billions and not etfs/certifixates), are money for thousands of years. They are also a commodity with intrinsic value that can be useful in the production of many products from electronics to healthcare materials. With a growing demand for automation, the opportunities and the potential for growth should be considered. Though it’s boring and slow, its value will never go to zero.

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    • Isaac Chan
      Isaac Chan
      35 Answers, 58 Upvotes
      Answered 2w ago

      Precious metals belong to the asset class of commodities. In short, commodities are basic goods used in commerce that is interchangeable with other commodities of the same type and are most often used as inputs in the production of other goods or services. For example, silver is a commodity and since most silver mined or used in production are almost the same with each other, there can be little differentiation between them. Other kinds of commodities include crude oil, grains and even water.

      The almost uniform nature of commodity products lands itself in a very different investment product as compared to others. Although they are affected by demand and supply as with other investments, different demand and supply factors affect their prices at different intensities. They are also linked to another kind of asset class, known as Derivatives, where players in the commodity markets, such as Olam use such investment products to hedge their risks of commodity price hikes.

      Not many people may talk about such a form of investments on this platform because the factors affecting such investments are more foreign, and less accessible to new investors trying to make their first investments. It is unlikely that people don't talk about it here simply because commodities are undervalued.

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    • Luke Ho
      Luke Ho, Money Maverick at Money Maverick
      160 Answers, 265 Upvotes
      Answered 2w ago

      That's true. I don't think it's an undervalued commodity. I think its valued correctly now and it spent centuries being overvalued.

      It's meant to be a hedge but even in extreme worst times, a 5% gold hedge across 1997 to now doesn't have a particularly positive impact on a diversified portfolio. So the math tells me to be a skeptic...

      That being said, I'd love to have a gold bar in a safe. Polish it when times are down. My preciousss

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    Vineeta Sonone
    Vineeta Sonone, Financial Assistant at Multi Management & Future Solutions
    30 Answers, 32 Upvotes
    11 Feb 2019

    Yes, investment in precious metals is a very good idea. The things to consider are:

    • Demand for precious metals will never go down.
    • Precious metals offer easy liquidity. These can get us cash whenever needed.
    • Can help in diversifying investments.
    • Worldwide acceptance.
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