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Home >> Why Complement Your Gold Portfolio With Other Metals?

Author: Gold Why Webmaster
Date: January, 2008
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Don't get me wrong, gold is by far my favorite investment in this period of uncertainty. Why do I like gold so much? There are many reasons but the top one is that gold has acted as a universal store of wealth for most of human history. There is no other asset which has had a longer track record as holding intrinsic value. Other great reasons to own gold include portability and an extremely limited supply. Given all the benefits of owning gold, why am I suggesting diversification away from gold? It's simple, diversification is the golden rule of investing. Diversification never pays off until crisis hits and market volatility strikes. I fully expect gold to rally and retain its intrinsic value as a store of wealth. The core reason I'm really stressing diversification in this case is because other precious metals may appreciate quicker than gold in years to come. In an effort to preserve your wealth, a well rounded portfolio is going to serve you extremely well. That being said, of the portion of your portfolio dedicated to hedging against disaster and preservation of wealth, I suggest allocating at least 75 percent to gold denominated investments. Diversify, but don't take it too far because gold is the ultimate asset.

Silver Bullion, Potential For Astronomical Gains

I have read a lot about silver in recent years. One of the things I read that struck me the most is the difference between gold and silver in industry. Robert Kiyosaki, author of Rich Dad, Poor Dad and columnist on Yahoo Finance, wrote that we hoard gold but use silver in a variety of applications each year. Because we are using so much silver each year in industry, this precious metal is actually a sleeper and likely to rally rapidly in coming years. We are using up all our silver supply and there will be very little left. Many investors do not understand this nuance and the price of silver does not probably reflect its true value at this point. Two of my favorite silver bullion coins include Silver Eagles and Silver Maple Leafs. The downside of silver? Each once ounce coin is worth only $15 versus $900 for a comparable gold coin. You need a lot of space to store a large silver bullion position and moreover the silver is not easily portable. One solution to this dilemma is considering a Silver Exchange Traded Fund or allocated silver bullion account in a precious metals vault.

Platinum, One of the Most Expensive Precious Metals

Platinum is one of the rarest precious metals. Each platinum one ounce coin trades for around $1,560 per ounce! Don't quote me on this but I once read that all the platinum ever mined only fills up a 20 foot by 20 foot by 20 foot cube. This is truly amazing if true. The main reason I like platinum is its portability. Platinum is worth almost twice the price of gold meaning it is even more portable than gold. One reason I am skeptical about platinum is its less stable track record. Gold bullion has acted as a universal store of wealth for centuries. Platinum is a newer phenomenon and is rallying rapidly because of huge demand in the jewelry business and also applications in the auto space. Without the demand in the jewelry space, I'm not sure if platinum would retain all its value but it definitely has its place in a well rounded precious metals portfolio, in moderation.

Palladium, The Cousin of Platinum

Palladium is a metal very similar to platinum and currently trades for around $375 per ounce. Palladium is a very metallic substance and is amazing to look at. I had my first experience viewing a palladium coin just a few months ago at my local coin shop. I was viewing a Canadian Palladium Maple Leaf coin. The reason I like palladium is its magical look. When I first held a gold coin in my hand, my jaw dropped. It was a life changing experience. I instantly knew why the metal was worth so much, it has an amazing quality about it. I got the same feeling with the palladium coin. Its luster is undeniable. Holding the coin, you know it has intrinsic value just like gold. One word of caution on palladium is the same as platinum, it does not have the track record of gold (but few investments do).

Oil, Black Gold

So I just described three precious metal alternatives to gold. I definitely recommend exploring silver, platinum, and palladium once you feel comfortable with your core gold portfolio. Another way to hedge against inflation is oil. We all know oil. The world cannot operate without it. In the event of a disaster, oil will hold its value because it is needed for so many applications. One of the easiest ways to invest in oil is to hold shares in oil mining companies. You obviously cannot place oil in your safe deposit box like gold. I have been a long time shareholder in an oil company that has treated me very well. To round out your portfolio, it definitely makes sense to pick up some shares in oil companies. The only downside of this investment is the doomsday scenario. If the US economy collapses, there will be no stock exchange to redeem the value of your oil shares (unless the company is traded on an international exchange). Your gold coins, however, are a real tangible asset that you can store in your pocket. Being fair, however, it will also be hard to redeem your gold from a US-based safe deposit box in a doomsday scenario. The only real protection in that case would be an overseas bullion vault. Let's definitely hope the doomsday scenario does not happen! I don't think it will, but definitely know the dollar is headed for rocky times which means a prudent investment in gold, silver, platinum, palladium, and oil will pay off handsomely. Happy investing!

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