The yellow metal wasn’t always seen as a powerful investment tool. Long before its popular usage as money, gold served as a great social and cultural connector. It was popularly used in jewellery, often paired with other metals or stones, serving as a status symbol of sorts. Since the beginning of this year, the popularity of cryptocurrencies has surged, resulting in a huge shift in perception. While it’s still considered a safe-haven for crypto investors, these digital assets are now seen as a viable investment opportunity rather than as a vehicle for hodling. This newfound appreciation for virtual currencies has resulted in a vast number of new investors seeking to enter the market at any price level. The question is, what is the best way to enter the market at this point? One option is to purchase low-cost, passive income instruments. If you’re looking to enter the market at a lower price point, one option could be to invest in a precious metal trust (PMT) contract. We’ll discuss what exactly a precious metal trust is, why you might want to consider investing in one, and how much gold you might need to fill a swimming pool.
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What Is A Precious Metal Trust?
Precious metal trusts, also known as bullion banks, are a way to safely store and invest in gold and other similar precious metals. Similar to a stock, the value of a PMT will fluctuate based on the value of the metal it is comprised of. When you invest in a PMT, you are essentially betting that the price of the metal in the future will be higher than its current price. This is quite the opposite of what you would do if you were to purchase the metal directly through an arm’s length transaction. In this case, you would be taking a big risk because the price could drop significantly after you make the deal. With a PMT you are guaranteed a gain in the long run because the value of the metal is tied to an index that will rise over time.
The Difference In Volatility
When speaking of risk, volatility, and uncertainty, we often think about the downside. However, that’s not always the case. Volatility is a measure of the uncertainty surrounding a financial instrument or investment. When the price of a PMT is high, it implies that the price of the underlying metal will fluctuate largely around the price point you set. As the price drops, the volatility decreases, becoming more and more predictable. This makes it easier for you to anticipate the price changes and take advantage of those who have less knowledge about the market. In other words, the more you know, the more you risk!
Flexibility
Last but not least, we have flexibility. In today’s world, flexibility is highly prized. When you have flexibility in your job, your daily schedule, or your spending habits, you often have more opportunity to take advantage of what you can while also enjoying what you have. Having the flexibility to invest in a PMT at this point in time, when so many options are available, is certainly a distinct advantage. Most importantly, it allows for more opportunity to try something new while maintaining a level of safety in what you already know and love. As the old saying goes, nothing ventured, nothing gained. So instead of risking it all on one big purchase, why not split your investment into small chunks to give you an opportunity to try something new while also maintaining the peace of mind that comes from keeping most of your financial affairs in the hands of a third party? The more you know, the more you risk!
How Much Gold Would Fill A Swimming Pool?
The great thing about precious metal trusts is that they allow for some extreme speculation without risking too much of your own money. For the purpose of this example, we’ll use the popular Gold Standard version from DigibyteX, which we’ll refer to as the “GDX Gold Standard” contract. This platform takes the uncertainty out of the gold purchase process by handling all the paperwork for you. All you need to do is set the amount of gold you want to purchase, how you want to pay for it, and when you want to receive your gold. After that, the rest is up to the platform. It will take care of the rest, including all the necessary paper work, storing your gold safely in well-known international vaults, and transferring the funds to your account when the time comes.
With the GDX Gold Standard, you’ll notice that the price you see is not the price you pay because the platform takes a small margin for handling transactions and providing storage. So if you’re looking for an extremely low-cost and easy way to store and invest in gold, the GDX Gold Standard could be the perfect choice. Not only will you save a significant amount of money, but you’ll also have the opportunity to try a new way of investing with minimal risk. You might even end up making a profit! Keep in mind, all you need to do is set up a simple account, deposit a small amount of money, and begin purchasing gold. You’ll start with the gold price at $1,300 an ounce and can choose to have your deposits passively generate income by storing them in a diversified portfolio of stocks, bonds, and cryptocurrencies. It’s as simple as that!
As mentioned above, the value of a precious metal will fluctuate based on the demand and supply of the underlying commodity. What happens if the demand for gold suddenly increases and the price rises above the $1,300 per ounce level? In this case, you could see a significant loss because you risked almost all of your money on one place, which now has the power to take your money and run. This is where the flexibility of a PMT is quite useful. You can decide to halt your purchases if the price rises above a certain point because you don’t want to risk your entire investment on just one metal.
Instead of putting all your eggs in one basket, you could spread your bets around. Investing in several precious metal instruments enables you to ride out the temporary increases in price and limit your financial loss. For example, if the price of silver increases significantly, but the price of gold remains relatively stable, you could see your silver investment gain a higher return because more people are buying it to hedge against inflation. In other words, when everyone is trying to get their money out of dollars and into other more stable, or tangible, or digital forms of money, then that’s usually a good indicator that the price of the metal you’re invested in is about to increase.
The Ultimate Risk-Reward Analysis
In general, the reward is more than worth the risk when it comes to investing in precious metals. The opportunity to make a large profit, particularly from such a safe and simple investment vehicle as a precious metal trust, while maintaining a high degree of security and flexibility is certainly appealing. Similar to other investment platforms, you’ll see the value of your precious metal increase as demand for the metal increases and decrease as demand drops. In general, the price is pretty easy to understand, and as long as you follow a few simple steps, you’re sure to earn a tidy sum of money without risking too much of your own hard-earned dollars.