There are currently four commonly purchased precious metals – silver, gold, palladium, and platinum. Some of these precious metals were practically unknown before the modern era due to the difficulties involved in wringing them out of the environment, while others – notably gold and silver – have been known since the unrecorded days of early history.
Palladium and platinum have achieved more prominence due to modern industrial uses, but still are not bought by many people who are interested in precious metals due to the greater flair and history of silver and, in particular, gold, whose very name conjures up vistas of extraordinary wealth.
The noble or precious metals are a curious group. All tend to be fairly (and in some cases, extremely) soft. They are extremely resistant to corrosion of all kinds, and none of them oxidize or rust. Gold and silver, in particular, are eternal and, with a little cleaning, with come undimmed from the dust of five thousand years. Of all substances, only some kinds of stone are as persistent. Some metals meet all of the criteria for membership in this exclusive club, but are too poisonous to be handled and are therefore not considered to be precious metals.
An Overview of the Four Precious Metals
Silver has always been the primary coining metal due to the fact that it is rare enough to be valuable, but common enough so that it can be used for small to moderate-sized, everyday transactions. It is one of the primary bullion metals today, especially for people who lack the money to buy gold in sufficient quantities to make it a realistic investment. For this reason, silver is frequently dubbed “poor man’s gold” – but there is no reason to dismiss this metal, which is an excellent investment and store of value.
Gold has been used for coinage since the invention of coins in Lydia (western Turkey) in around 700 B.C.. However, because of its rarity, it has always been worth far more than silver, and was therefore used only for the largest transactions through most of history. Adherence to a gold standard was the main factor driving the United States into the Great Depression, because the gold standard constrained the money supply too much for a thriving modern economy and the result was a disastrous collapse.
Palladium, discovered in the same year that Napoleon was drenching the earth with blood at Austerlitz (1803), is a member of the platinum family of metals. It is extremely useful in modern technology, providing material for automotive catalytic converters as well as in advanced medicine, water purification, and the inevitable electronics. Palladium is a shimmering, chrome-like metal that is also appreciated for its beauty, and palladium coins are quite valuable.
Platinum is an extremely rare metal mined in the Caucasus Mountains of Russia (explaining the existence of both Soviet and Russian platinum coins), Columbia, and South Africa. Like its close relative, palladium, platinum has many applications in modern science and medicine, ranging from art photography to chemotherapy to catalytic converters. This metal is extremely expensive, which, barring the discovery of a gigantic deposit at some time in the future, makes it an excellent investment metal.
Diversifying Your Portfolio with Different Precious Metals
Although it is fairly certain that precious metals will remain precious in the foreseeable future, their exact price movements are hard to predict, and do not always correspond to general economic conditions or the inflation rate. Each precious metal has its own characteristics on the market, its own usefulness (or lack thereof) for practical uses, and its own degrees of rarity and volatility.
Silver is one of the more stable and predictable precious metals, with clear ties to markets rooted in reality rather than mere speculation. The price of silver has kept pace with inflation over the past twenty or thirty years, and is likely to spike upwards in the near future even if inflation stays low. This is because it has industrial applications due to its highly conductive properties – far in excess of the electrical conductivity of copper – and its tenacious resistance to corrosion and oxidation.
Gold, on the other hand, is a purely speculative metal and a complete gamble. It has basically no use other than financial speculation and jewelry – the term “goldbrick” is actually a very apt one, since it is perhaps the most idle of metals. There is considerable evidence that its price has absolutely nothing to do with general inflation.
During several recent inflationary periods, the price of gold fell sharply, while the price skyrocketed to ridiculous levels as soon as the current speculative frenzy began. If you buy gold, you are betting on the metal rising to an even higher price rather than plunging to a fraction of its current value.
The best strategy, if you can afford it, is to buy some of all four main precious metals – silver, gold, platinum, and palladium. This will cover practically every market variation that is likely to occur. It is inconceivable that all four would fall in value simultaneously, and when one of them rises in value, you can sell it and use some of the proceeds to buy the metal which is weak now but will eventually undergo a “correction”.
Silver is the foundation of all good precious metal portfolios because of its closer ties to actual economic activity rather than just commodity market speculation. Once you have a good base of this metal, it would probably work best to buy equal amounts of gold, palladium, and platinum. Occasionally add more silver when silver bullion coins of a specially collectible type are struck at some mint.
Single Metal Portfolios
Of course, you are also free to focus entirely on one kind of metal if you prefer. A single metal portfolio is most typically made up wholly of silver, because of budget constraints preventing the collector from buying the more expensive precious metals. However, some people prefer to focus on one metal out of personal taste and preference, or a particular belief about which is likely to prove the best investment in the years to come. Gold is the most unpredictable metal, since its value is almost entirely subjective and free-floating, and silver is the most stable.