How Premiums Affect Your Investment in a Precious Metal Market?

There are a lot of factors that you need to consider when you invest in a precious metals market. Being an investor, you definitely want to create a portfolio that minimizes your risk exposure. This is the reason why you add paper as well as physical precious metal investments in your portfolio. However, you should know that there is no favourable situation for an investor when he enter into a market. Every investment carries some sort of risk but that risk can be mitigated by devising an effective financial strategy.

A careful decision making is required to avoid financial losses and achieve healthy future prospects. Besides, fluctuating trends in a precious metal market due to speculation always put your investment at risk. It is only wise to consult Your Personal Financial Mentor when you invest in a precious metal market because being an expert in his field, he can guide you how to invest and manage your investment by avoiding possible risks in order to earn stability and financial growth.

When you purchase investment-grade physical precious metals, such as gold and silver, you have to pay a bit higher than a spot price but when you sell it back, you will receive a lower local currency than a spot price. So you can say that difference between the spot price and the price you pay for precious metal is called the premium. However, purchasing items with the lowest premium is not always a wise strategy. Smaller gold coins or gold coins with lower content have huge premiums but are easier to use when you carry out small transactions in a precious metals market. Moreover, specific gold or silver coins are legal tender in certain countries and it is worth paying extra premiums to have these coins in your portfolio.

For precious metal like silver, premiums vary hugely. A large 1,000oz silver bar may have a very low premium but in spite of low premium, you may not wish to dispose it off.  On the other hand, about thousand silver coins of 1oz will have a higher cost but at the same time, it will also be far more liquid than a 1000oz bar. Moreover, UK residents should rather absorb higher premiums for Sovereign and Britannia because its capital gains tax free and due to their legal tender. Premiums vary from country to country. The weight, size and presence of metal content in a physical precious metal are some of the factors that decide the amount of premium.

See more about  precious metal market right here.

Categories: Precious Metals Market

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November 14, 2013 How Premiums Affect Your Investment in a Precious Metal Market?