by Michael Totten

Created on: December 16, 2010   Last Updated: December 17, 2010

To be considered a precious metal, a metal must be rare, occur naturally, and be chemically and radioactively stable. This combination of traits gives the precious metal its financial value. Unlike modern floating currencies, which only have fiat value, a precious metal is considered a store of value. For this reason, investment in precious metals is often used as a hedge against currency fluctuations.

Four precious metals have an ISO 4217 currency code: gold (XAU), silver (XAG), platinum (XPT), and palladium (XPD). To be saleable on commodity markets, precious metal ingots must be formally assayed and hallmarked.

Gold

Gold is the best-known precious metal. Although it is no longer used in standard coinage, gold continues to be popular in jewelry. Gold also has many industrial applications, especially in electronics. Globally, mines produce about 82 million troy ounces of gold each year.

When other factors in the economy make the value of fiat currency uncertain, investors often turn to gold as a hedge against financial instability. This makes the price of gold an excellent inverse predictor of the state of the economy: The higher the price of gold, the less reliable are other investments. At the time of writing, gold has reached a record high price of over $1,400 USD per troy ounce.

Silver

Besides gold, silver is the other precious metal which has been used extensively in coinage. Sometimes silver alloy coins can still be found in circulation, a carryover from the days of the silver standard. Silver is popular in jewelry. It also has many industrial applications, although it is no longer used extensively in photographic development, due to the introduction of digital photography. Of all the precious metals, silver is the most reactive. Globally, mines produce about 547 million troy ounces of silver each year.

Silver can be used as a hedge against financial instability, but is less effective than gold because its price is more volatile. At the time of writing, silver has reached a price of over $25 USD per troy ounce. However, unlike gold, the price of silver is not directly linked to the economic forecast.

Platinum

Platinum is popular in modern jewelry. Its best known industrial use is in catalytic converters, but it also has several other electrical uses. Platinum salts are toxic, but metallic platinum does not commonly react with other elements to create those salts. Metallic platinum itself is not toxic. Globally, mines produce about 5 million troy ounces

• 1
• 2
• Next Page >>