How precious can your investment be?
3 min read
We have decided to bring to our community, after much request, two of the most popular precious metals on the market; gold and silver.
Why can investing in precious metals be a good complement to your portfolio?
- They have intrinsic value given its characteristics: gold can be transformed into jewelry and silver is used in many industrial cases from batteries, to photography and semiconductors.
- They have a set amount of supply, as gold and silver are mined. This process limits the amounts produced, making it possible to control its value by the amount of demand.
- They do not have credit risk, unlike shares of single companies.
- They usually have low correlation to the market. This means that you hold them if you think the market will suffer a recession, countering your market risk from the poor performance of stocks and bonds.
What are commodities?
Gold and silver are referred to as commodities. They are another class of assets compared to shares and bonds. Whilst shares and bonds track the performance of companies and countries, commodities track the performance of goods. The most commonly traded commodities are:
- Natural gas
When you buy them on Oval, you buy ounces of gold and silver at their Euro exchange rate, making a so-called spot transaction. Gold and Silver ETNs are a simple means of investing without the need to deal with futures or own the physical asset.
How can you buy them on Oval?
You will find Gold Rush and Silver Bullet, our two new products, in the Investments section in app. You can choose to invest from as little as €10 and set up a percentage of your savings to be invested on a weekly basis. Think about this as an addition to your other investments in the Oval marketplace.
Usually gold and silver are bought through an investment in an ETF index. This investment is simply based on derivatives pricing the value of the actual asset. On Oval the ETN is investing directly in ounces of gold and silver at their Euro exchange rate. The correct ticker symbol is XAU EUR for gold and XAG EUR for silver. These represent the actual spot price of the underlying 1 ounce of gold and 1 ounce of silver if you bought them in Euros. It is a way of investing in the commodity without physically holding golden bullions or silver coins.
Gold Rush and Silver Bullet are the first investments on Oval that are completely different from the ones we have already offered. Investments in gold and silver can be volatile, but since they have maintained their value over time, you should think of them as part of a longer term strategy.
Furthermore, in this uncertain economic time you can dispose of some so called safe haven assets, that do not follow market trends and, even during times of market turbulence. This means that by adding them to your investment portfolio, you are able to benefit from diversification. In the first 8 months of 2020, the price of gold has increased by more than 20% and that of silver by almost 50%.
Holding vs. Trading
In Oval we have always promoted the importance of a longer term and patient investment. This means we want to offer products that can add value to our users in the long run and that have the ability to diversify their investment portfolio.
We have also listened to our users’ needs and wants, we would like to start introducing a more fluid way of investing into single commodities, besides the indexes with many shares we have today. These products can be sold daily like other ETNs. They will also have a new fee structure that reflects the bid/offer spread in the market, which we have translated into a 0.5% cost each time you buy and sell the ETN, allowing you to always know the costs you are incurring. We hope that this new investment will give you a great tool to think about your future and to make your investment portfolio even more diversified.
The product is intended to be offered to retail investors who fulfill all of the criteria: they are sophisticated and experienced in trading complex securities; they are looking for an investment opportunity that reflects an expectation that the underlyings will increase in value over time; they are able to bear a total loss of the amount invested; and they have a medium-term investment horizon.
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