Precious metals are in high demand. Although gold has historically been the headlining investment metal, silver, platinum, and palladium are quickly becoming popular portfolio diversifiers. Here’s what you need to know about investing in these precious metals, organized into three easy, action-oriented steps.
Learn more: How to start investing: A 6-step guide
Precious metals are alternative assets, meaning they react to economic conditions differently from stocks and bonds. This is good for portfolio diversification, but it can test your risk tolerance if you’re not prepared.
Let’s review the uses, risks, growth drivers, and investment purposes of silver, platinum, and palladium, so you know what to expect before you buy.
Learn more: Thinking of buying gold? Here’s what investors should watch for.
Silver is purchased for investment and industrial purposes. As an investment, physical silver takes the form of coins, jewelry, flatware, and decorative pieces. The white metal is also used to manufacture electronics, automotive components, medical devices, and solar panels.
-
Risks: The price of silver is more volatile than the price of gold. Silver is also less liquid than gold, meaning gold is easier to sell for cash.
-
Growth drivers: Silver’s value rises with higher industrial demand, supply constraints, and economic uncertainty.
-
Investment purpose: “Silver provides inflation protection and industrial exposure,” said Eric Croak, president at Croak Capital, a wealth advisor.
Platinum is rarer than gold or silver. This metal is popular for jewelry applications and essential for producing catalytic converters that help reduce gasoline emissions.
-
Risks: The price of platinum is more volatile than that of silver or gold. Fluctuating industrial demand and a geographically limited supply — primarily from South Africa — contribute to platinum’s unpredictability. Platinum also has low liquidity relative to gold.
-
Growth drivers: Industrial demand and emissions regulations influence platinum’s value.
-
Investment purpose: “Platinum can be a stabilizing play,” Croak said. Croak sees platinum as a promising “under-the-radar” asset based on its long-term supply outlook and its role in energy transformation.
Learn more: How to invest in gold in 4 steps
Palladium, a member of the platinum-group metals (PGM), is rarer than platinum. Palladium is chemically similar to platinum but weighs less and tolerates higher temperatures. It’s also used as a jewelry metal and in industrial applications, and automotive manufacturers often use platinum and palladium together in catalytic converters.
-
Risks: Palladium’s value is dependent on automotive demand and is reactive to geopolitical risks. Relative to platinum, palladium is less liquid and has lower trading volumes.
-
Growth drivers: Automotive demand is a key driver, along with electronics manufacturing activity, clean energy innovation, and jewelry demand.
-
Investment purpose: Croak described palladium as a short-term play “because of its low liquidity and ultra-volatile price action.”
Learn more: Robo-advisor: How to start investing right away
You can invest in precious metals in digital or physical forms.
Digital options include:
-
Precious metals basket funds: These funds offer exposure to multiple metals and broader diversification benefits compared to single-metal funds. Aberdeen Investments has a popular precious metals basket fund with the ticker GLTR. GLTR tracks pricing from the London Bullion Market Association (LBMA) for each metal.
-
Single-metal ETFs: Single-metal ETFs, such as iShares Silver Trust (SLV), are less diversified than basket funds. SLV tracks the performance of the LBMA Silver Price.
-
Futures contracts: Futures contracts bind you to buy or sell a precious metal under stated terms. These are highly risky because the out-of-pocket cost is small relative to the metals exposure you gain and how much you can lose. Comex, a platform for trading futures contracts, defines separate terms for silver (SI=F), platinum (PL=F), and palladium (PA=F) futures.
-
Mining stocks: Mining stocks tend to rise faster and fall faster than underlying metal prices. You can opt for a focused miner like Hecla Mining Company (HL) or a diversified operation like Sibanye-Stillwater (SBSW). HL mines silver, and SBSW is a large producer of platinum, palladium, rhodium, and gold.
Physical options for precious metals include jewelry or bullion in the form of bars and coins. If you decide to purchase physical metals, you must arrange for storage, security, and, possibly, insurance.
Learn more: What to know before buying gold, silver, or platinum from Costco
Your investment goal should guide the key decisions of precious metals investing, including:
-
Whether you buy one metal or a basket of them
-
What form your investment should take
-
How much you allocate to precious metals within your portfolio
Two common investment goals for precious metals are diversification and short-term gains.
Long-term investors typically pursue precious metals for diversification and inflation hedging. Silver, platinum, and palladium have a low correlation with other asset classes, such as stocks and bonds. This means the metals can appreciate when stock prices are falling, particularly when inflation is the root cause. These offsetting behaviors, in small doses, can limit overall portfolio volatility.
Croak characterized silver, platinum, and palladium collectively as “useful pieces of a non-correlated trio,” suitable for investors who already own stocks, bonds, and cash. He advises a 3% to 5% allocation for the trio, primarily as an inflation hedge.
Learn more: Stablecoins explained: What they do, how they work, and why risks remain
Short-term trading of precious metals is an advanced, high-risk strategy. It’s best avoided unless you’re experienced, well-funded, and hearty enough to tolerate big pricing swings.
Silver, platinum, and palladium individually are volatile enough to provide short-term gain opportunities. A silver position is the least risky of the three, while palladium-focused investments are the riskiest. According to Croak, palladium trades at a massive premium to silver and gold, “but if you can stomach its wild swings, there’s an opportunity in palladium’s spikes.”
Your allocation for a short-term strategy should be low — that is, an amount you can afford to lose.
Learn more: Prediction markets: What they are and how they work
Silver can provide diversification and inflation protection within a well-structured portfolio.
Platinum is more volatile than silver and gold, but it has diversification benefits. A small, strategic position in platinum could act as a portfolio stabilizer over the long term.
You can invest in palladium bullion or opt for digital assets such as ETFs, futures contracts, or mining stocks.
Tim Manni edited this article.
