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INVESTING IN PRECIOUS METALS.
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Analytical and comparative assessment of four precious metals as investment vehicles.... More...
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Paper Abstract:
Analytical and comparative assessment of four precious metals as investment vehicles. Gold, Palladium, Platinum, Silver. Factors for and against precioius metal investment compared with other investments. Optional investor strategies for investing in precious metals. Comparison of the performance of the four precious metals. Pricing and price volatility. Seven Exhibits.

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INVESTING IN PRECIOUS METALS: AN ANALYTICAL AND COMPARATIVE ASSESSMENT Introduction Over the past decade, precious metals have taken a back seat to securities as the preferred investment vehicle by the majority of investors. The slippage in preference among investors, however, does not necessarily mean that investing in precious metals is not a good strategy for some investors. This research provides an analytical and comparative assessment of precious metals as an investment vehicle. This assessment covers four precious metals — gold, palladium, platinum, and silver. The presentation of the findings of the assessment is in three major sections, as follows: (1) a comparison of the performance of the four precious metals co

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Gold in the IMF. As the data presented in Exhibit 1 indicate, gold experienced a strongrun-up in price from 1972 through 1981. Retrieved fromthe Internet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. The first factor is the performanceof precious metals, as investment vehicle, in comparison with theperformance of other investment vehicles. Price trends and price volatility for the four precious metals arecompared directly in Exhibits 5 and 6 respectively, which may be found onthe following two pages. Silver, as is true of gold, has a long and storied history. S. As precious metals, the value of artifacts is onlytheir melt down value. Retrieved fromthe Internet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. London: Kitco. (2 1). International Monetary Fund. Since 1985, silver has traded in a relativelynarrow range. London: Kitco. Kitco. The exhibit presents three price levels foreach year - the high trading price for the year, the average trading priceover the entire year, and the low trading price for the year. (1999). Since 1999, platinum prices haveexperienced a substantial increase. Retrievedfrom the Internet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. (2 1). Kitco. Kitco. (2 , February 1). Since 1996, however, price volatilityfor palladium has increased dramatically. Based on price trends, both palladium andplatinum appear to be better choices as investment vehicles than eithergold or silver. London: Kitco. Kitco. Gold prices 2 1. London: Kitco. Retrieved fromthe Internet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. Palladium prices 2 1. (2 1). Ingham, G. Retrieved fromthe Internet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. London: Kitco. (2 1). Other governments are in a position to control, to some extent, therelease of palladium and platinum to the markets. Silver prices 1972-1998. Gold is good only for the longhaul. Exhibit 5[pic] Exhibit 6[pic] Exhibit 7[pic] As Exhibit 7 indicates, common stocks, as represented by the Standard& Poors 5 Index, appear to provide a steadier long-term appreciation thanany of the four precious metals included in the analysis. The price run-up was especiallysteep from 1977 to 1981, and sharp price drop occurred over the succeedingfour years - 1981 to 1985. Kitco. London: Kitco. (1996, Winter). Palladium, as an investment vehicle, has gained in popularity inrecent years. Silverprices are much lower than prices for other precious metals because thesupply of silver is much greater than is true for other precious metals.Exhibit 4, which may be found on page 8, provides a graphic illustration ofsilver prices for the 3 -year period 1972-2 1. Comparing the Performance of Four Precious Metals as Investment Vehicles: Gold, Palladium, Platinum, and Silver Gold has an ancient history as a preferred investment vehicle. Kitco. (2 1). (2 ). The slippage in preference among investors, however, does notnecessarily mean that investing in precious metals is not a good strategyfor some investors. Platinum prices 2 1. Fuel Cell Technology News, 5, 1-2. Platinum has a steady history as investment vehicle, and has gained inpopularity in recent years. In this current research, commonstocks, which have assumed the top spot in investor preferences over thepast 1 years, are compared with the four precious metals in Exhibit 7,which may be found on page 12. Silver prices 2 . (2 1). Exhibit 1[pic] Exhibit 2[pic] As the data presented in Exhibit 2 indicate, palladium prices wererelatively steady from 1972 through 1986, with the exception of a sharpprice spike from 1978 to 198 . Based on volatility, platinum is a better choice as aninvestment vehicle than palladium. (1997, September). As artifacts, they have additional value; however,that value frequently is difficult to realize upon sale. Retrieved from theInternet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. (2 1). As Exhibit 3 also indicates the price volatility (defined for thepurposes of this study as the percentage variation between high and lowtrading prices) of platinum has been relatively moderate with theexceptions of the 1979-1981 and the 1986-1989 periods. (1999). Retrieved from theInternet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. Kitco. Kitco. Retrieved from theInternet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. Kitco. Palladium prices 2 1. London: Kitco. (1993, August 9). Review ofSocial Economy, 54(4), 5 7-529. Retrieved from theInternet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. As Exhibit 2 also indicates the price volatility (defined for thepurposes of this study as the percentage variation between high and lowtrading prices) of palladium was moderate from 1972 to 1996, with theexception of the 1979-198 period. Gold,however, has lost some of its luster since the mid-198 s. Investing in mutual funds specializing in precious metalsis the best option for most investors. This research provides an analytical and comparative assessment ofprecious metals as an investment vehicle. Washington, DC:International Monetary Fund. References Blair, A. The end of the bull market in 2 indicates thatstocks, in spite of what some investors believe, move both up and down.Common stocks continue to be over priced, and the probability is that theaverage 12 percent per annum on common stocks that prevailed over the 1926-2 period will continue to prevail over the long term. Gold prices 2 . The second major factor that must be considered in comparing preciousmetals with other investment vehicles is the ability of governments toinfluence prices. Platinum prices 1972-1998. Factors Arguing For and Against Investing in Precious Metals, As Opposed to Other Investment Vehicles Three major factors require consideration when comparing preciousmetals with other investment vehicles. Over the 1985-2 1 period, silver prices have trendedslightly downward, although there have been some modest price increases -1987, 1994, and 1998. London: Kitco. As the data presented in Exhibit 4 indicate, silver prices remainedrelatively steady over the 3 -year period of analysis, with the exceptionof the 1979-1982 period. Retrieved from theInternet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. This assessment covers fourprecious metals - gold, palladium, platinum, and silver. The governments of the major developed economies havemade concerted efforts to minimize the role of precious metals in theinvestment markets. Retrievedfrom the Internet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. Price volatilityincreased again subsequent to 1996 but not to the levels reached in eitherof the two earlier periods. Financial World, 93-94. (1999). London: Kitco. (2 1). The third factor requiring consideration is the probability thatcommon stocks will continue as the preferred investment vehicle of themajority of investors. Kitco. Platinum shortage. London: Kitco. London: Kitco. As Exhibit 1 also indicates the price volatility (defined for the purposesof this study as the percentage variation between high and low tradingprices) of gold has been moderate with the exception of the 1979-1983period. Platinum prices 2 1. For the ordinary investor, the mutual fundoption is preferable. Kitco. Since 1996, however, palladium prices haveexperienced a sharp run-up which has not abated. investing in precious metals: an analytical and comparative assessment Introduction Over the past decade, precious metals have taken a back seat tosecurities as the preferred investment vehicle by the majority ofinvestors. Silver prices 2 1. Palladium prices 1972-1998. The exhibit presents three price levels for each year - thehigh trading price for the year, the average trading price over the entireyear, and the low trading price for the year. London: Kitco. Most of thesegovernments, such as the Republic of South Africa and the Russia, cannot,at the present time, afford to withhold the metals in any great quantity.At some point in the future, however, this situation could change. Theexhibit presents three price levels for each year - the high trading pricefor the year, the average trading price over the entire year, and the lowtrading price for the year. Retrieved from theInternet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. Since 1985, however, the trendin gold prices, in spite of some small rallies, has been slightly downward. Fortune, 128(3), 32-34. (2 1). Kitco. Exhibit 3[pic] Exhibit 4[pic] As Exhibit 4 also indicates the price volatility (defined for thepurposes of this study as the percentage variation between high and lowtrading prices) of silver has been relatively moderate with the exceptionof the 1979-1983 and another exception in 1987. (2 1). Retrieved fromthe Internet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. Palladium prices 2 . London: Kitco. London: Kitco. (1999). Kitco. Exhibit 3, which may be found on page 7,provides a graphic illustration of platinum prices for the 3 -year period1972-2 1. London: Kitco. Taking possession of metal increases the costs ofsecurity and storage. Using precious metals as adiversification option is recommended for most investors. World Gold Council. Retrieved from theInternet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. London: WorldGold Council. Teitelbaum, R. Money is a social relation. Starchild, A. As the data presented in Exhibit 3 indicate, platinum prices had beenanything but steady over the 3 -year period of analysis, with the only calmperiod being from 1991 to 1999. (2 1). Conclusion Investing in precious metals is a valid alternative for investors whohave some tolerance for price volatility and who are not attempting to getrich overnight. Gold prices 2 1. Gold prices rallied from 1985 to 1988. The exhibit presents threeprice levels for each year - the high trading price for the year, theaverage trading price over the entire year, and the low trading price forthe year. The power of governments within this context allowthem to strengthen the role of credit money as opposed to precious metals.Further, with respect to gold, the huge gold holding under the control ofgovernment allow them to manipulate the price of gold. Portable wealth: A guide to precious metalsinvesting. Retrieved from theInternet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. Price volatility increasedagain in 1998, but was short lived. (2 ) A guide to investing in gold. Exhibit 2, which may be found on page 4, provides a graphicillustration of palladium prices for the 3 -year period 1972-2 1. The presentationof the findings of the assessment is in three major sections, as follows:(1) a comparison of the performance of the four precious metals covered inthe research; (2) a consideration of factors that argue for or againstinvestment in precious metals as opposed to other investment vehicles; and(3) optional investor strategies for investing in precious metals. (2 1). The overall price trend from 1972 to 1996was slightly upward. Silver prices 2 1. Retrieved from theInternet 2 1- 6-13 at; http://www.kitco.com/ cgi-bin/yearly_graphs.cgi. Kitco. Boulder, Colorado: Paladin Press. Shares in miningfirms require exceptional investor knowledge and involve exceptional risk. Palladium,however, almost matches the common stock performance, and the metal is nota volatile as are stock investments. Platinum prices 2 . Gold prices 1972-1998. Optional Investor Strategies for Investing in Precious Metals Investing in precious metals may occur in a number of scenarios -taking possession of metals, purchasing certificates representing metals,buying shares in mining firms, buying shares in mutual funds specializingin precious metals, and buying artifacts (such as coins or jewelry)containing precious metals. Kitco. Gold turns to dust. Kitco. Exhibit 1, whichmay be found on page 3, provides a graphic illustration of gold prices forthe 3 -year period 1972-2 1. London: Kitco. (2 1).

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