Investing in Precious Metals

The primary precious metals could be called the grandfathers of investing. It was the hoarding of gold, silver and to a lesser extent other metals that gave rise to the concept of “brokers” and “markets”. Eventually the demand for these metals gave rise to the concept of currency, which was based on metals, which were held in storage. This is a long way of saying that precious metals are considered by many to be the one investment (along with land) that will maintain value despite market changes in the short term.

Notice that the emphasis is on value and not on stability. Precious metals have a tendency toward price fluctuation for a number of reasons, which will be discussed later. Many investors feel safe knowing that some of their portfolio is in precious metals and as such they are not dependent on the financial markets or currency. Therefore, there are many benefits to investing in precious metals and having some percentage of a portfolio invested in them can certainly make sense.

How they are bought?
Most precious metals can be purchased in the form of the actual asset (usually in coins or bullion) or they can be purchased in the form of a “contract” giving one the right to buy the precious metal in a certain quantity.

Some also invest in precious metals through mining operations which are considered to be valued in a similar manner to the metal by the reasoning that when the price goes up the profits of the mining operation will also rise.

What are the various Precious Metals and how are they valued and traded?

Gold is by far the most popular investment choice. Much of this has to do with its history and the fact that it is the basis (or has been) for certain currencies. Gold is also used as the standard in the International Monetary Fund, which speaks to its value as a commodity. Most trading in gold is actually done in the form of coins or certified bars, which are called bullion. Gold can be volatile in terms of price fluctuation since it is the most actively traded precious metal as compared to the others.

The actual use of gold as a resource primarily takes place in the jewelry, dentistry and electronics industries.

Gold is measured by “Troy Weight” and by “Grams”. The term Carat is used to designate the percentage of actual gold when the metal is alloyed with other metals. The fact that gold is very soft requires this to be the case in almost any situation.

Silver is second in popularity to goal and for various reasons actually has more practical uses from an engineering standpoint. Most of this is due to silver having the highest electrical and thermal conductivity as compared to all other metals.

The most popular use for silver is in tableware, jewelry, coins and photography equipment.

Silver is measured in a similar manner to gold and is often traded in the form of “ingots” or coins.

Platinum is a newcomer in some ways since it was not discovered by Europeans until the discovery of the new world. However, before that time it was valued by many of the indigenous peoples of the Americas. Though platinum is more precious than gold it is still not as popular.

Platinum has more industrial uses than the other precious metals due to the catalytic properties natural to the metal as well as the fact that it is immune to corrosion.

Platinum is used in jewelry, manufacturing, electrical contacts, dentistry and automobile emission control devices (namely catalytic converters and their offspring). Roughly, platinum is typically valued at twice the value of gold and is traded less actively.

Platinum trades in coins and bullion bars in a similar manner to gold and silver.


Information is for educational  purposes only and is not be interpreted as financial advice. This does not represent a recommendation to buy, sell, or hold any security. Consult your financial advisor.

Categories Investing and Financial Planning

Leave a Reply

Your email address will not be published. Required fields are marked *