Why are Gold and Silver Prices Rising?
Historically, gold and silver, to a lesser extent, have served as value preservation assets. This means that during risk-averse periods and persistent inflation, like the current one, investors rely on their qualities to prevent erosion of their wealth. Another historically valuable asset is the dollar, but there’s a growing perception of risk associated with it. The volatility, combined with Donald Trump’s trade strategy that weakens the dollar to make imports more expensive, are key factors in its trend.
In summary, the rising prices of gold and silver are due to their value preservation qualities, and since they’re priced in dollars, the weakening of this currency further boosts their performance. In Mexico, a country with a mining tradition, there are various options to invest in gold and silver, ranging from coins to more sophisticated instruments.
How to Invest in Physical Gold and Silver
One of the simplest ways to invest in gold and silver is by purchasing them physically. This method is favored by small buyers seeking security for their savings. In Mexico, these coins are minted by the Casa de Moneda. Some investors consider them as “real money.”
- Centenarios: Known gold coins valued at 50 pesos gold.
- Aztecas: Valued at 20 pesos gold.
- Hidalgos: Valued at 10, 5, 2.5, and 2 pesos gold.
- Onza Libertad: A highly liquid silver coin, unlike other metal coins.
Where to buy physical gold and silver. You can acquire these metals from commercial banking institutions like Banorte, Banamex, and BBVA. Prices per piece vary by institution, and their sale is subject to availability.
It’s crucial to note that this format has a drawback. Storing at home is not recommended, and safe deposit box services come with high costs. Investing in jewelry is also not advisable as design, brand, and IVA (Value Added Tax) add costs to the real value of each piece.
How to Invest in Gold and Silver on the Stock Market
A more sophisticated way to gain exposure to precious metals is possible through the stock market. Using intermediaries like GBM, Bursanet, or Kuspit, Mexicans can purchase ETFs (Exchange-Traded Funds), a type of fund that replicates an asset’s behavior and trades like stock.
- SPDR Gold Shares (GLD ticker) by State Street Bank and iShares Gold Trust (IAU) by global manager BlackRock are two of the most significant gold ETFs worldwide.
- iShares Silver Trust by BlackRock is one of the most sought-after silver ETFs.
Another way to participate in the business is through investment funds that include both gold and silver positions, as well as percentages in mining companies, helping to diversify. A more volatile but high-potential method is investing in mining stocks like Peñoles or Grupo México.
Other Points to Consider
Once you understand the different types of precious metal investments, there are factors to consider to fully leverage the benefits of an investment that profits from both a decline in the Mexican peso against the dollar and a weakening of the US dollar.
- For physical gold and silver investments, apart from storage and custody costs, it’s essential to research the reliability of the seller. Obtaining them from regulated institutions or using a calibrated scale with the Mexican Consumer Prosecutor’s Office (Profeco) seal is advisable.
- For stock market investments, these instruments usually have a spread or difference between the purchase and sale price. Therefore, they are not suitable for short-term speculation but a long-term value preservation avenue.
Key Questions and Answers
- Why are gold and silver prices rising? Due to their value preservation qualities, and the weakening US dollar boosts their performance.
- How can I invest in physical gold and silver? By purchasing coins from regulated institutions like Banorte, Banamex, or BBVA in Mexico.
- What are the drawbacks of physical gold and silver investments? Storage at home is not recommended, and there are high costs associated with safe deposit boxes. Jewelry investment isn’t advisable due to added design, brand, and tax costs.
- How can I invest in gold and silver on the stock market? By purchasing ETFs (Exchange-Traded Funds) through intermediaries like GBM, Bursanet, or Kuspit.
- What factors should I consider when investing in precious metals? The reliability of the seller for physical investments and understanding that stock market instruments are for long-term value preservation, not short-term speculation.
