Precious Metals
Precious metals such as gold and silver are among the oldest alternative assets. They are often viewed as stores of value rather than sources of income or growth, and their behaviour differs significantly from shares, bonds, and property.
This section explains how precious metals work as an asset class, what actually drives returns, and the practical risks investors often overlook.
This page is part of the AltAssetGuide — a practical, education-first resource explaining what alternative assets are and how different asset classes work in practice.
Explore the full guide: Home · Precious Metals · Property & Land · Collectables · Business & Startups · Digital Assets · Debt & Lending
What you’ll learn here
- Why people hold gold and silver in a portfolio
- The difference between physical and paper exposure
- How pricing, spreads, and storage affect returns
- Liquidity, taxation, and regulatory considerations
- When precious metals tend to perform well — and when they don’t
How precious metals function as an asset
Unlike businesses or bonds, precious metals do not generate cash flow. Their value is influenced by factors such as inflation expectations, currency strength, real interest rates, and investor sentiment.
This means returns are often driven by macroeconomic conditions rather than productivity or growth. Metals can act as a hedge in certain environments, but they can also underperform for long periods.
Physical vs paper exposure
Investors typically gain exposure to precious metals in two main ways:
- Physical ownership — coins or bars held personally or in secure storage. This introduces costs such as premiums, storage, and insurance.
- Paper or synthetic exposure — ETFs, funds, or certificates that track metal prices but rely on intermediaries.
Each approach involves different trade-offs around liquidity, counterparty risk, and control.
Key risks to understand
- Price volatility: metals can fall sharply during strong economic cycles
- Opportunity cost: long periods with no income or growth
- Costs: dealer spreads, storage, insurance, and selling fees
- Liquidity constraints: especially for physical holdings
- Tax treatment: varies by jurisdiction and product type
Guides and articles
The guides below explore specific aspects of precious metals in more detail.
How precious metals fit into a wider portfolio
Precious metals are typically used as a complement to traditional investments rather than a replacement. Allocation size, time horizon, and expectations matter more than headline price forecasts.
Understanding what metals can — and cannot — do helps avoid disappointment and overexposure.