Ask any veteran investor for advice on ways to combat inflation and nine times out of ten they’ll recommend adding precious metals to your portfolio. After all, metals like gold, silver, platinum, and palladium have a proven track record of holding their value even when the rest of the economy is in a freefall.
So, should you invest in precious metals? Absolutely. But, which one of the four most popular precious metals should you purchase? Join us, as we analyze the history, uses, and market potential of these metals to find the best one for you.
Historical Context of Precious Metals as Investments
Before we dive further into the properties of individual precious metals, it is important to understand the history and trends of these metals as a whole.
Historical significance of precious metals
The association between precious metals and wealth goes back thousands of years. Gold for example, was used as jewelry and making idols for centuries before it became legal tender. We’ve even found treasures containing gold that date back to 4000 BC.
In 550 BC, King Croesus of Lydia (an area that’s now part of Turkey) struck the first gold coins — further strengthening the connection between precious metals and wealth.
Trends in precious metal investments
As far as we know, the modern use of precious metals as investments really took off in the latter half of the 20th century. This is especially true for years following the 1971 end of the gold standard as gold became a safe haven asset.
Today, people’s trust in precious metals has grown even stronger as they’ve proven their resilience against the 2008 financial crisis as well as a global pandemic in 2020.
Gold: The Traditional Choice
As you might have noticed from our discussion above, gold is by far the most popular and most influential of the precious metals. This is hardly a surprise, though, as it is also the first precious metal widely used by ancient civilizations.
That said, how does it stack up as an investment in the 21st century? Let’s find out.
Properties and uses of gold
For starters, gold is a completely inert metal that does not rust or tarnish. Additionally, gold is also extremely ductile and malleable — allowing it to be shaped into sheets and wires without breaking.
This combined with the excellent electric conductivity of the metal has given it use in electronic devices and circuit boards. We’ve even seen some businesses that extract this gold from broken electronics and sell it for profit.
Other than that, most of gold’s uses revolve around decoration and art like jewelry or gold foil coverings on certain dishes. These are the reasons why gold has intrinsic value and is a safe investment.
Market analysis and performance trends
Looking back at the last century of gold’s market performance, we see a general upward trend, even when we adjust its prices for inflation. Analyzing this graph further, we notice a number of notable spikes in its value, including:
- After the 1971 abolishment of the gold standard
- During the late 1970s due to rapidly increasing inflation
- Following the 2008 financial crisis
- Immediately after the 2020 COVID-19 pandemic
Pros and cons of investing in gold
- Gold has a proven track record of protecting your wealth against inflation
- It's not as volatile as assets like stocks and cryptocurrencies
- You can quickly liquidate gold in case you ever need the money in a pinch
- Gold is accepted as a valuable item in almost every part of the world
- You can physically own the investment instead of trusting a brokerage with your money
Cons
- Gold generally doesn’t have as much potential for immediate growth as stocks or crypto
- As a physical good, your gold investment can be stolen
- You will have to pay storage fees on a regular basis if you decide to use a precious metal storage company
SEE TOP GOLD INVESTing COMPANIES
Silver: The Affordable Alternative
For many investors, including myself, silver is the more affordable alternative to gold. While not as firmly as it is with gold, silver is still considered a safe haven asset — making it a very viable investment in the long run. Here’s everything you need to know about this precious metal before making a purchasing decision.
Properties and industrial uses of silver
Similar to gold, silver is also an internet metal that does not rust. However, we have seen it get tarnished over time and lose its luster when exposed to air. Its ductility and malleability are also closer to gold than most other metals — making it just as useful for making jewelry.
The primary way silver differentiates itself from its more expensive counterpart is with the number of industrial uses it has. From what we know, silver is used in electronic contacts, soldering, water purification, and solar panels. Additionally, some industries also utilize silver as a catalyst for various chemical reactions.
Market analysis and performance trends
Looking at the past 100 years of silver’s performance, we notice a very similar upward trend as gold. Even the major spikes in gold’s price history during major recessions and periods of high inflation are also present for silver.
One of the most notable differences between the two comes from silver’s recent performance; it didn’t return to its post-2008 peak after the pandemic whilst gold did. If you are interested in how much gold vs silver you should invest in, read my article here.
Pros and cons of investing in silver
Pros
- Just as resilient against inflation and recession as gold
- Its lower price reduces the barrier to entry
- Can increase in value due to its use in expanding industries like solar energy
- Provides a very safe diversification option for your investment portfolio
Cons
- Requires more storage space to hold the same monetary value as gold
- Industrial dependency also has the potential to reduce silver’s value during times of economic uncertainty
SEE TOP SILVER INVESTING COMPANIES
Platinum and Palladium: The Industrial Metals
Both platinum and palladium are relative newcomers compared to gold and silver which have a centuries-old history relating to wealth storage and as investment assets. That said, they are still a part of the precious metal group and hold plenty of value of their own. Let us explain:
Unique properties and uses of platinum and palladium
In broader terms, platinum and palladium are industrial metals. Here are some of their most notable properties and uses in our opinion:
Platinum
- It’s used in high-temperature applications due to its very high melting point of 1,768 °C
- Platinum jewelry is often used as a very suitable match for diamonds and other gems, and as an alternative to white gold
- About 50% of platinum’s demand comes from its use in catalytic converts of most automobiles
- Platinum-based drugs like cisplatin, carboplatin, and oxaliplatin are used in certain chemotherapy drugs for cancer treatment
Palladium
- It can absorb and release large amounts of hydrogen, making it useful in hydrogen storage systems
- Palladium is used in the electronics industry to coat electrodes
- It’s used in dental alloys due to its biocompatibility and resistance to tarnish
Market trends and potential for growth
We could only find reliable price trends for these metals dating back to the 1970s and from what we’ve seen, platinum and palladium were on the rise. Palladium even hit an all-time high of 2,981 USD in early 2022.
However, the vast majority of demand for these metals comes from the gas-powered automobile industry. So, as the world transitions towards electric vehicles, the usefulness of these metals is also going down.
Comparing investment potential with gold and silver
While gold and silver have some industrial uses, most of their demand comes from their status as safe-haven assets. Platinum and palladium, on the other hand, are tied to an industry sector that is shrinking by the day. This is why we predict a very notable decline in the market value of these two metals — making them significantly less viable than gold or silver.
SEE TOP Precious metals COMPANIES
Factors to Consider When Choosing a Precious Metal to Invest In
Here are a few key factors we recommend you to consider, before diving head-first into the world of precious metal:
Market volatility
While not as much as stocks or crypto, precious metals can still experience volatility due to market dynamics, global events, and investor sentiment. Understanding these price movements can help gauge potential risks and rewards associated with each metal.
Economic factors influencing prices
Economic stability, currency fluctuations, and monetary policies can all affect the value of precious metals in the market.
Diversification and risk management
Diversifying a portfolio with more than one precious metal can spread risk and minimize exposure to individual market fluctuations.
How to Invest in Precious Metals
While there are many ways to invest in precious metals, these are the most reliable options that we recommend based on our personal experiences:
- Buying and storing physical precious metals from an online or local dealer
- Purchasing stocks of precious metal mining companies, ETFs, or mutual funds
- Setting up a convenient precious metal IRA (Individual Retirement Account) for a secure retirement fund
Conclusion
While investing in precious metals is a good idea in general, not all of these metals are equally viable. For instance, both gold and silver have had a very positive reputation thanks to their resilience against inflation and recessions. On the other hand, the value of platinum and palladium is steadily going down as their use in automobiles is starting to diminish.
So, to answer the question we posed at the start of this guide, we recommend adding gold and silver to your portfolio. To see how much gold vs silver we recommend, take a look here. If you would like to invest in gold or silver in your retirement fund, here are steps on how to set up a precious metal IRA. You can also read about the pros and cons of a gold or silver IRA, or see our list of the best precious metal IRA companies. From our experience,Goldco and Augusta Precious Metals are the best choices in 2024.
