Precious Metals Investment Quick Start | Choose the Right Types for Stable Profits

Why is gold and precious metals investment worth paying attention to? Simply put, precious metals like gold and silver have inherent value-preserving properties and often serve as safe havens for investors during economic turbulence. Many regard them as effective hedges against inflation, and with diverse trading methods and high liquidity, both conservative investors and aggressive traders can find suitable investment channels.

What types of precious metals can be invested in?

Precious metals refer to rare, high-value metallic assets in nature. Historically used as currency, today they are valued for their investment potential and industrial applications. The main precious metals include 8 elements, with gold, silver, platinum, and palladium being the most favored by investors due to their relatively stable prices and chemical stability, offering strong asset protection.

Gold: An ancient symbol of wealth

The reasons gold is a top investment choice include:

• Millennia of value storage: Thousands of years of history prove gold maintains purchasing power during crises, making it an ideal hedge against uncertainty
• Global high liquidity: Gold can be traded worldwide in various forms (coins, bars, jewelry), and can be converted to cash at any time
• Portfolio stabilizer: Gold is often negatively correlated with stocks and bonds, serving as a core tool for diversification
• Natural inflation hedge: When fiat currency depreciates, gold often retains or increases in value
• Industrial demand: Medical, automotive, electronics, aerospace sectors sustain demand for gold, supporting its price

Silver: Investment driven by industrial demand

Silver’s investment logic differs from gold:

• Widespread industrial use: Solar, electronics, photography, and other industries generate strong demand, pushing prices upward
• Inflation protection features: Similar to gold, silver performs well during inflationary periods
• Historical monetary status: Long used as a medium of exchange and store of wealth

Platinum: Long-term potential from rarity

Platinum is less mainstream but has promising prospects:

• Industrial focus: Mainly used in catalytic converters and jewelry manufacturing
• Limited supply: Reserves are far less than gold and silver, offering greater long-term value potential
• Portfolio diversification: Provides a differentiated allocation compared to traditional precious metals

Palladium: The darling of the automotive industry

Investing in palladium requires attention to industry trends:

• Automotive catalytic converter demand: Essential in new vehicles, with relatively stable demand
• Supply constraints: Limited mining output and geopolitical factors can drive prices higher
• Industry volatility risk: Highly dependent on automotive industry health; economic downturns pose risks

Market observation: Currently, gold and silver remain the most popular precious metals for investment. Gold is favored by institutional investors for its stability, while silver benefits from industrial demand. For higher returns and risk tolerance, platinum and palladium are worth considering, but investors should monitor supply-demand dynamics and industry cycles.

What channels are available for precious metals investment?

To venture into precious metals, investors face various options, each with different costs, liquidity, and risks.

Method 1: Buying physical precious metals

This is the most straightforward approach—directly purchasing bars, coins, or jewelry.

Advantages: Full ownership of tangible assets, strong psychological security
Disadvantages: Requires proper safekeeping (bank vaults, home safes), occupies space; high transaction costs (spread 1%～10%); longer liquidation time; not suitable for frequent trading

Suitable for: Long-term asset allocation, conservative investors with a preference for physical assets

Method 2: Precious metals account

Open an account with a bank to buy, without physically taking possession; the bank holds the assets.

Advantages: No need for self-storage; relatively safe
Disadvantages: Higher fees (opening fee from TWD 100); bid-ask spread exists; no interest paid; liquidity is moderate

Suitable for: Investors wanting physical backing but not managing storage themselves

Method 3: ETF funds

Exchange-traded funds track precious metal prices, allowing buying and selling like stocks.

Features:

• Taiwan ETFs: 0.25% per trade, 1.15% annual management fee
• US ETFs: Lower costs (0～0.1%), 0.4% annual fee
• Easy trading, suitable for small-scale regular investments
• Market risk remains

Suitable for: Stock investors, seeking low-cost and convenient options

Method 4: Futures contracts

Futures allow investors to lock in prices for buying or selling at a future date via contracts.

Features:

• Leverage trading and two-way positions
• Good liquidity, easy to open and close positions
• Fixed settlement date; requires timely closing or rollover
• Low transaction costs (0.008%～0.015%)

Risks: Leverage amplifies losses; wrong predictions or missing settlement can lead to full loss or forced liquidation. Requires expertise and discipline.

Suitable for: Experienced traders with high risk tolerance

Method 5: CFDs (Contracts for Difference)

A flexible recent trading method tracking spot precious metal prices.

Features:

• High leverage (up to 1:200) but high risk
• No fixed settlement date; hold as long as desired
• Low entry barrier; minimum trade size 0.01 lot
• Supports long and short positions

Trading rules: Each contract specifies leverage, margin, spread, and position limits. Due to leverage, price fluctuations can significantly magnify gains and losses.

Suitable for: Active traders seeking flexible, short-term arbitrage

Core advantages of precious metals investment

• Hedge against inflation: Institutions and individuals use precious metals to protect against currency devaluation
• Intrinsic economic value: Globally recognized, widely used industrially, combining storage and investment value
• 24-hour trading: Flexible entry and exit
• Diverse trading methods: Futures for long/short positions, low fees
• Portfolio diversification: Low correlation with stocks and bonds, reducing overall volatility

Risks in precious metals investment: what you need to know

Price volatility risk

Precious metals can fluctuate 20%～30% in short periods. Supply-demand imbalances, geopolitical changes, and USD movements can rapidly influence prices, making short-term prediction difficult.

Counterfeit risk

Market exists for fake bars and coins. Some vendors may sell substandard or overpriced products, leading to losses. Always buy through reputable, licensed channels.

Leverage risk

Futures and CFDs use leverage. Investors only need to deposit a small margin to control large positions, but adverse price movements can magnify losses, potentially wiping out the entire capital overnight or triggering forced liquidation.

Risk management tips: Set reasonable stop-loss levels, avoid excessive leverage, and regularly review positions.

Investment strategies for precious metals

Allocate based on risk tolerance

Adjust precious metals proportion according to personal circumstances:

• Conservative investors: 10% precious metals + 90% stocks, focus on asset preservation
• Moderate investors: 20% precious metals + 80% stocks, balance growth and safety
• Aggressive investors: 30% precious metals + 70% stocks, pursue higher returns

These ratios are not fixed; adjust flexibly based on goals, investment horizon, and risk appetite.

Passive vs active trading

Passive strategy: Believe in long-term value of gold, buy physical or ETFs and hold, patiently waiting for appreciation. Suitable for busy professionals who cannot monitor markets frequently.

Active strategy: Attempt to seize market timing for buying and selling to profit from short-term fluctuations. Requires continuous market analysis, technical skills, and risk control—more challenging than passive holding.

Regular review and risk control

Regardless of strategy, always:

• Regularly review performance and market conditions
• Set stop-loss points to limit losses
• Use trailing stops to lock in profits
• Avoid overtrading to reduce costs

Summary: How to start precious metals investment

In the current environment, precious metals have become an essential part of personal and institutional portfolios. They offer inflation protection, high liquidity, and diverse trading options, including physical metals, ETFs, futures, and CFDs.

Compared to stocks, precious metals carry different risk profiles—high volatility but strong hedging properties. Investors trusting in gold’s long-term value can buy physical assets or ETFs for appreciation; those interested in trading can utilize futures or CFDs to actively engage with market opportunities.

Remember: Precious metals are not rocket science, but respecting risks is crucial. Use stop-loss orders, control leverage, diversify holdings, and build a suitable investment system step by step, starting small and learning thoroughly before scaling up.