Precious metals such as gold and silver are often seen as safe havens during times of economic uncertainty. So far in 2022, both metals have stayed true to this theory.
So, how much have gold and silver prices risen this year? And should you consider investing in precious metals? Let’s take a look.
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How have gold and silver performed this year?
At the beginning of January, the gold price stood at £1,351 an ounce. Despite recent falls, the gold price has generally headed upwards in 2022. As of Tuesday 22 March, the gold price stands at £1,468. That’s a healthy 8.6% increase since the year began.
To put that performance into context, the FTSE 100 is down 0.25% over the same period, while the FTSE 250 has fallen a massive 12%.
For silver, it’s a similar story. At the beginning of the year, an ounce of silver cost £17 per ounce. Like gold, the price of silver has headed upwards for the majority of the year, particularly during February.
As of 22 March, the silver price stands at £19.17 per ounce. That represents an increase of 12.7% compared to its value at the start of the year.
How do gold and silver differ as investments?
Gold and silver are traditionally seen as commodities that are likely to hold their value, especially during times of economic uncertainty. That is because they’re difficult and expensive to find and mine. As a result, demand for these metals isn’t likely to wane in future.
Right now, the world is very much experiencing economic uncertainty due the rising cost of living, the ongoing war in Ukraine and questions surrounding how well societies will cope in a post-pandemic world.
Aside from being seen as a reliable way of holding value, we also know that gold and silver are prized for their beauty. As precious metals have been around for millions of years, this isn’t something that is likely to change any time soon.
There are, however, key differences between gold and silver. Gold is valued higher than silver, so has a higher cost per unit and is most commonly used for jewellery.
Silver is arguably more useful than gold because it’s used in manufacturing electronics and chemicals. It also has medical uses too. For these reasons, the price of silver can be impacted by a greater number of variables.
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Should you invest in gold and silver?
While gold and silver have both risen this year, there’s no guarantee that either precious metal will continue performing strongly for the rest of 2022. The direction of gold and silver for the rest of 2022 and beyond, is likely to depend on the outlook for the global economy.
So, if you’re a pessimist and expect world economies to maintain their sluggish performance in future, then you may be included to buy precious metals. In contrast, if you believe economies will soon find their stride, then you may feel better off investing in traditional stocks and shares.
Of course, there’s nothing stopping you from holding gold, silver and stocks as part of a diverse portfolio.
How can you gain exposure to precious metals?
If you want to gain exposure to precious metals such as gold and silver, you have two options:
- Buy precious metals through a bullion company: you’ll own physical gold or silver if you choose this option. However, you may have to pay insurance and storage costs, which can be expensive.
- Buy an exchange-traded commodity (ETC): if you buy a precious metals ETC, then you won’t actually own the physical commodities. Instead, your investment will track the price of gold or silver. In other words, ETCs can give you exposure to gold or silver without the downside of having to own and manage physical bullion.
Looking to buy an ETC? You can buy an ETC of your choosing through a normal share dealing account. It’s also worth knowing that ETCs can be held within a stocks and shares ISA. This can be a good option if you want to protect your returns from the taxman.
If you wish to go down the ISA route, do be aware that you’ve only got until 5 April to use up your ISA allowance for the 2021/22 tax year.
Please note that tax treatment depends on your individual circumstances and may be subject to change in the future. The content in this article is provided for information purposes only. It is not intended to be, nor does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
