The term ‘physical metals’ refers to investments made in physical gold and silver. These investments can be made in terms of gold and silver coins, bars or jewellery. The world over, gold and silver enthusiasts prefer physical investments over ETFs. The latter are virtual investments, much like the stock market investments that many of us make. While physical investments carry a lot of benefits, there are some downsides as well. This article looks at some of those disadvantages.
There are several advantages to having physical gold and silver assets. Some of these benefits don’t apply to your usual investments like stocks, bonds, etc.
1. Tangible in nature
Your gold and silver assets are tangible, and they don’t need any maintenance. These assets also do not destroy or decay (lose value in time). Let’s say you own a house in Sydney, and its current value is AUD 1million. However, it’s not necessary that the value of your home will be constant or will increase over time.
If property prices in your neighbourhood fall, the value of your real estate would be negatively impacted too. This doesn’t happen with gold and silver. Prices of these physical metals largely remain the same, and in some cases, they might increase remarkably as well.
2. Stored Value
Your financial advisor might claim that stocks perform better than bullion. According to Yahoo Finance, gold has outperformed stocks regularly in the last 20 years. Most investors think that gold is a defensive investment.
This is not true. Research shows that gold performs inversely proportional to several asset classes. This means that whenever investors feel there is some risk or instability in their investments, they turn to gold. In short, buying gold is an excellent strategy to diversify your portfolio.
3. Easy availability
You can buy gold and silver easily and anywhere in Australia. With just one click, you can buy your preferred metal safely, securely, and with very few questions asked and technical procedures in between. There are various companies that can help you in building strong portfolios. Auctus Precious Metals Portfolios can be one of the best ways to deal with preparing portfolios in a stronger manner. This will help you get daily updates on gold and silver prices, expert analyses, etc. to new and existing investors. You can consider buying your bullion from these trustworthy firms.
Physical metals can’t be hacked at all. If you are holding gold in an ETF format, there are some chances that its value will diminish because of extraneous factors. Your ownership can even be hacked. However, the bullion that is lying inside your locker can’t be electronically hacked or stolen.
5. Precious metals are valued dense
You can easily hold gold coins with a whopping worth of $50,000 in your palm. But this isn’t the case with your dollar bills. You would have to stack $50,000 worth of bills on a table, and those bills would consume a lot of space.
6. Assets for heirs
You can pass on your gold or silver coins to your heirs. These physical assets would still store a lot of value over generations. There are some cons as well when it comes to buying physical metals like gold and silver.
1. High commissions
When you buy physical gold or silver, you need to buy an abnormally high commission. Sometimes, your rate of the commission would be higher than the stock price of a blue-chip company.
2. Storage worries
Storage can always be a concern as to buy or rent some storage space for your gold and silver can be of high maintenance. Storage costs are quite high when it comes to physical metals. Another disadvantage is the worry associated with your storage. Most of the time, investors are worrying about the safety of their gold deposits.
You cannot exchange your gold and silver with normal cash that easily. If you want to purchase a house using your gold coins, it’s not that easy. That is why we say that physical metals are illiquid assets.