Whenever you hear an ad for precious metals, specifically gold, it always seems to hammer the same talking points: (1) Gold has never been worth zero, (2) it’s a good hedge against inflation, and (3) fiat currencies are losing value. All of those may be true, but there is another reason why precious metals are a solid investment. Pardon the pun.
Of the most popular precious metals, silver and gold are the most common due to their historical use as a form of currency. In addition, they both have significant commercial and industrial value far greater than what is used for coinage/bullion, with silver having even greater industrial use than gold.
Depending on the statistics referenced, gold is used predominantly for jewelry (in excess of 70%), then roughly 13% for investment/coinage/bullion, and roughly 11% industrial (electronics, dentistry, medicine, aerospace, glass-making, awards). Sliver, on the other hand, is used predominantly for industrial purposes (roughly 75%), with roughly 20% for jewelry, and roughly 5% for investment/coinage/bullion.
That is probably the single greatest reasons to consider silver as a portion of any well-diversified portfolio. Well, that and its cost-per-ounce affordability. An argument could be made for copper, but it does not have the same appeal due to its lack of historical use as a currency.
Despite their uses, gold and silver values are largely driven by speculation rather than pure supply and demand factors. If you need proof, simply look at their historical values, especially over the last few years. Their demand has not changed much regarding their primary commercial or industrial uses, but their pricing has been extremely volatile.
As always, Buyer Beware…
When it comes to owning precious metals, it is wise to do your homework first. Ask yourself (or your advisor) the following questions. Do I really need pre-1933 coins? Is it really necessary to purchase coins rather than bullion? Why can’t I buy at spot prices? Most of all, is an investment in precious metals right for me?
Stay tuned as we continue to explore the world of finance…