Sensible Investing: Mining Stocks or Precious Metal Bullion?

precious metal bullionAs investors contemplate the best precious metal bullion acquisition strategies, many will wonder if putting their money in mining stocks is a prudent move. Although mining stocks can be profitable short-term, bullion wins out as a long term investment.

Often stocks in precious metal mining companies rise much faster than the price of bullion, but when precious metals markets plunge, bullion is likely to move less precariously than mining stocks. Mining shares, just like other paper financial instruments carry inherent risks. The largest of these risks is that mining stocks can become completely worthless, while this eventuality is unlikely for silver or gold bullion.

Other risks for mining stocks are changes in mining regulations, labor disputes, bad management and structural demise. Although a mine may have promising potential, this can easily be eclipsed by bankruptcy, surging production costs, or political and economic issues. Introduction of the human factor is the greatest danger to paper financial instruments, as we’ve recently seen running rampant in our current crisis economy.

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