Not only gold, but also other precious metals are popular types of investment among Czechs. But there are several ways to put money into them, and although they are often talked about as a certainty, even in this case there can be a risk of loss. In the next part of the Investing in the Czech Republic series, you will find out what your options and risks are when saving in precious metals.
In the Czech Republic, small investors are currently most interested in four precious metals: gold, silver, platinum and palladium. “Gold has traditionally been considered a safe investment and retains its value even in times of economic instability. It is considered a ‘safe haven’ for investors looking for stable, long-term value. Gold is also often used as a hedge against inflationary pressures and currency risks,” summarized Filip Mikulec, business director of Synergy Gold, which deals with investments in precious metals.
According to Mikulka, silver is more interesting mainly for business entities: “It is more affordable than gold. It is consumed more quickly due to its wide use in industry, including electronics, photovoltaic panels and medical devices. For business entities, one of the advantages of buying silver can be (VAT payer’s point of view) the option to claim value added tax (VAT) deduction. A VAT payer who buys silver can deduct the VAT paid on his silver expenditure from his tax base. This way he can reduce his tax liability and save money.”
Lenka Klimentová, spokeswoman for the Czech Mint, which for 30 years has been procuring coins in circulation as well as investment coins and medals, drew attention to the question of value added tax: “For investors, however, from the point of view of depositing savings and protecting their value, the most interesting investment gold, i.e. coins . It is not burdened in the same way as bars with value added taxes.“
Gold as security. But the price can fluctuate
Mainly gold is taken as insurance against an unstable political situation. But beware, this does not mean that its price will only increase. “It is such an established safe asset. On the other hand, gold is a fluctuating asset, the price can fluctuate. It does not mean that if you invest money in gold, you will not lose that money or that the threat of loss is excluded,” pointed out the company’s portfolio manager Cyrrus Tomas Pfeiler.
According to him, the price of gold is influenced, for example, by the exchange rate of the dollar. The higher its exchange rate, the more likely it is that the price of gold will fall. Bonds are a certain “competitor” of gold. “When bonds bear something, like five percent now, the investor who is looking for safety would rather buy a bond than gold, which does not bear any bond yields,” explained Pfeiler.
Then, according to Pfeiler, it generally applies that if the price of a troy ounce (31.1 grams) of gold exceeds $2,000, i.e. about 46,000 crowns, the demand for physical gold will fall.
The Czech National Bank is buying gold, at the end of October it owned around 27 tonnes. Watch TN Live:
Types of investment in precious metals
Investments in precious metals come in many forms. Anyone can imagine a gold coin or silver ingot. But then there are the possibilities of saving or investing in manning companies or various funds. The basic overview was prepared by Filip Mikulec and you can see it in the table below.
|a type of investment in precious metals||What is it about||benefits||disadvantages|
|Investment bullion||these are physical ingots of precious metals, such as ingots, bricks or smaller pieces||direct control over the investment, you can keep it at home or store it in a safe||it is necessary to ensure safe storage and security against theft|
|Investment coins||minting coins from gold, silver and other metals with standardized weight and purity||easily tradable with wide market acceptance||they may be associated with higher costs to buy and sell compared to regular gold or silver bullion|
|ETFs and funds||ETFs are exchange-traded funds, as well as funds focused on precious metals; allow you to invest in gold and silver by buying shares on the exchange||you don’t have to own the physical metals or worry about storing them||you are exposed to the risk associated with the fund’s performance and may be subject to management and trading fees|
|Manning companies||investments in shares of companies engaged in mining and production of precious metals||you can invest in the precious metals industry without having to hold physical metals||you are exposed to the risk associated with the performance and stability of the companies; it is necessary to take into account that the growth of the price of precious metals is not necessarily directly proportional to the growth of the share price|
|Savings into gold||installment sales; you choose a strong partner with whom you open a commodity account and simply save for the given bullion or coin||purchase price averaging; if something is volatile in the market, it pays to buy gradually||the disadvantage can be the underestimation of the partner company that offers the product (opaque organizational structure, unclear supply chain, high merchant margins…)|
|source: Filip Mikulec / TN.cz|
Klimentová explained what all affects the price differences between an ingot and a minted coin or medal made of precious metal: “The price of a coin and a medal is influenced by their artistic processing compared to an ingot or a brick. In general, one could say that there is no table from which it would appear that for example, an ounce medal or coin will always cost the same. For example, the reputation and renown of the author, i.e. the artist and sculptor, also influence the pricing, the chosen theme and possibly also the depicted personality, but above all the number of pieces in the issue. In the case of gold medals, it is also necessary to add VAT. With silver, there is VAT everywhere.”
Investing in precious metals is for everyone
Investing in precious metals is not expensive. For example, at the Czech Mint, the cheapest items can be found for under a thousand crowns. “We have an offer for everyone so that everyone can afford a commemorative coin. A grandmother will give her grandchild her first ducat in her cradle, or a young man a coin for the love of his chosen one,” explained Klimentová.
She mentioned that Golden Savings is popular among clients of the Czech Mint. People choose the coin they want in the menu and how much they are able to save. It will then automatically calculate how long it will take them to save for it. “After reaching the target amount, the coin will be delivered to their home by mail, or we will store it for free in the vaults of the Czech Mint,” added Aleš Brix, sales director and member of the board of directors.
You can usually find certified gold or platinum “bricks” in shops and e-shops, one gram costs less than 2,000 crowns, an ounce of silver (about 31.1 grams) or an ounce silver coin can be bought for around a thousand.
Bullion dealers typically sell precious metals for substantially more than they buy them. Selling prices can be half as much as the purchase price. However, you are not limited to brick-and-mortar stores when selling. “Gold is generally seen as a store of value. If you don’t like the purchase price at the dealer, you can easily arrange with someone close to you to buy it from you,” Pfeiler said.
Here you can see examples of investment coins of the Czech Mint:
What part of the portfolio to reserve for precious metals
Economists agree on one thing – precious metals are mainly used to diversify an investment portfolio. “Buyers already own other investments such as stocks, bonds or real estate, adding gold and silver to the portfolio can reduce risk and increase investment stability,” Mikulec said.
“In my opinion, the ideal share of gold in the portfolio is something between 5 and 15 percent. For me, gold is such an insurance policy against adverse developments,” said Pfeiler. Mikulec mentioned that the portion of the portfolio reserved for precious metals is generally about ten percent, depending on the investment strategy.
What to look out for when buying precious metals
When buying physical gold or other precious metals, it is important to be sure that you are buying genuine and quality precious metals. Mikulec listed several ways to find out. They are the first certificates. These are provided by some bullion dealers. Certificates confirm the origin, purity and authenticity of metals. “These certificates can also be issued by independent laboratories or institutions that perform testing and verification of the quality of metals. The certificates should contain information on weight, purity, serial number and other important data,” Mikulec said.
They are another purity and marking. “Metals such as gold and silver have a standardized fineness that is expressed in carats or percentages. For example, 24 karat gold is 99.9% (999.9/1000) pure. Metals may also be marked or stamped , which confirm their authenticity and authenticity. It is important to familiarize yourself with various brands and stamps that are recognized and trustworthy,” Mikulec specified.
And by the third, they are specialized packaging. Most dealers of precious metals sell them in special packaging that ensures their protection and authenticity. “These packages can contain holograms, serial numbers, protective signs and other elements that are used to identify and protect metals. As an investor, I would insist on the original protective packaging,” Mikulec advised.
It is also important to buy from trusted sellers with good reputations who offer quality and reliable goods. You should also try to consult an expert.
Factors to consider Objectives of the investment It is important to realize why you want to invest in precious metals. Do you want to achieve long-term value growth, diversify your investment portfolio, or protect yourself from inflation? Risk It is important to note that precious metal prices may fluctuate and may be affected by various factors such as demand, supply, economic conditions or geopolitical events. Diversification Investing in precious metals can be one way to diversify an investment portfolio. It is important to consider how much of your portfolio you want to allocate to precious metals and how to incorporate them. Generally speaking up to 10% depending on the strategy. Liquidity An underrated aspect of investing. When buying gold or silver, paper assets (money) are exchanged for a commodity asset. The liquidity of this exchange can be affected by its form, i.e. whether it is an investment coin or a bullion. The grammage (weight of the bullion) can also affect liquidity. Types of Investments There are several ways to invest in precious metals, including physical ownership (such as gold or silver), savings, investing in ETFs or shares of mining companies (see table above). It is important to consider which method of investing is best for you. Costs Before investing, it is important to consider the costs associated with investing in precious metals, such as fees for buying, storing or selling. These costs can affect the resulting return on investment. Long term horizon Investing in precious metals is considered long-term. It is important to have realistic expectations and be prepared for the fact that the value of precious metals can fluctuate in the short term. source: Filip Mikulec / TN.cz
before you start investing in precious metals