Should Investors be Buying Precious Metals?

While stocks, bonds, and currencies depend on confidence in institutions and policy discipline, precious metals stand outside that system - and that independence is increasingly valuable.  

Here’s five reasons to consider precious metals…

First, fiat currency risk is rising, not falling.  Fiat currency is government money (U.S.Dollar) that is not backed by any physical asset, such as gold. Government debt levels are at historic highs, and servicing that debt depends on interest rates remaining manageable. This creates powerful incentives for policymakers to tolerate higher inflation or pursue financial repression rather than enforce austerity. Over time, this erodes the purchasing power of paper currencies,  such as the U.S. Dollar which is at its lowest level in four years. Gold and silver, by contrast, cannot be printed or politically manipulated. Their scarcity is physical, not theoretical, making them a direct hedge against long-term currency debasement.

Second, precious metals offer insurance against monetary policy mistakes. Central banks are attempting a delicate balance between controlling inflation and sustaining economic growth. History shows that such fine-tuning usually fails, leading either to stagflation or sharp recessions. In both scenarios, gold has traditionally preserved value when confidence in policy deteriorates. Silver, while more volatile, can amplify gains if inflation becomes embedded in the real economy. When policymakers lose credibility, metals tend to gain it.

Third, portfolio diversification benefits are strongest when they are most needed. Equities and bonds - once considered diversifiers - have increasingly moved in tandem, particularly during inflationary shocks. Precious metals do not rely on earnings, growth, or yield curves, allowing them to perform differently when financial assets struggle simultaneously. A portfolio with no exposure to gold or silver is implicitly making a large bet that markets remain orderly and policy errors remain contained.

Fourth, geopolitical and systemic risks are underpriced. Rising geopolitical tensions, trade fragmentation, and weaponization of currencies have renewed interest in assets that are not tied to any single government or financial system. Central banks themselves are signaling this shift through sustained gold purchases, reinforcing gold’s role as a neutral reserve asset. Individual investors can draw an important lesson from this behavior: when institutions with long-term horizons seek protection, private portfolios should take note.

Fifth, precious metals remain undervalued relative to financial assets. Despite years of expansive monetary policy, gold and silver remain modestly priced compared to global money supply growth and asset valuations. Equities trade at historically elevated multiples, while bonds offer limited real yield after inflation. Metals, meanwhile, provide optionality - limited downside relative to systemic stress and meaningful upside if confidence in fiat systems weakens.

Critics argue that precious metals produce no income, but this misses the point. Insurance has a cost, yet few regret having it when risk materializes (think homeowners insurance here). Gold and silver are not purchased to maximize yield; they are purchased to preserve purchasing power when other assets fail.

In today’s market, buying precious metals is not a speculative bet - it is a strategic decision to own assets that thrive when confidence falters. For investors concerned about inflation, debt, and systemic risk, failing to own gold or silver may be the greater risk of all.

Of course, investors seeking exposure to precious metals often face a choice between owning physical gold and silver or investing in precious-metals mining companies. While both approaches benefit from rising metal prices, they serve different roles within a portfolio and respond differently to market conditions.

Owning physical gold or silver bars is primarily about wealth preservation and risk protection. Physical metals carry no counterparty risk and are not dependent on corporate performance, financial markets, or management decisions. In times of inflation, currency debasement, or financial instability, gold and silver bars can retain purchasing power when paper assets falter. Gold, in particular, has a long track record as a safe haven, while silver adds diversification through its dual role as a monetary and industrial metal. However, physical metals generate no income, incur storage and insurance costs, and are better suited for long-term holding rather than active trading.

Precious metals miners, by contrast, are designed for growth and leverage. Mining stocks often provide amplified exposure to metal prices because profits can rise faster than the underlying commodity when prices increase. Many miners also pay dividends, making them attractive to investors seeking income. That said, miners introduce risks unrelated to metal prices, including operational challenges, rising production costs, geopolitical issues, and broad equity market sell-offs. During market stress, mining stocks frequently decline alongside other equities -even when gold prices hold steady.

Ultimately, the choice depends on investment objectives. Physical bars function best as a defensive asset and portfolio hedge, while mining stocks serve as a higher-risk, higher-reward play on precious-metal prices. Many investors benefit from combining both, using physical metals for stability and miners for upside potential, rather than relying on one alone.

We have identified five (5) mining opportunities for investors looking to gain access to gold or silver miners.  Reach out to Lee @rlrobinson.com for more information.  Also consider a subscription to our Dividend Newsletter for other opportunities in the precious metals area.

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