In times of economic and fiscal uncertainty, it pays to have a strong hedge against risk, and there really isn’t anything much stronger than the precious metals category. A precious metal is defined as a metal that retains its value regardless of economic fluctuations. The demand for commodities such as gold and silver never really changes much as the years go by and only seems to increase, as the market gets more and more volatile.
The reason is because certain metals are useful and rare beyond the stretch of time. Think about this for a second: before anyone printed a currency on paper and defined that as legal tender via a central bank or treasury, the first commonly accepted currency was gold. The only way to trade gold without actually having it was through a note of debt to a certain amount of gold in a bank.
Of all the precious metals, 4 of them are most notable and due to their industrial use, it makes them precious.
Gold, the first universal currency
As a metal, gold has more uses and more rarity than any other metal on the planet. To some it might seem like a shiny object with a purely aesthetic appeal, but the reality is, gold has been used in industries such as electronics, dentistry, aeronautics and even the automobile industry. The reason for this is because gold is strong, doesn’t rust and acts as a powerful conductor of electricity.
One of the most commonly known uses for gold is as the conducting metal for airbag circuitry. In the event of an auto accident, the firing mechanism for an airbag has to go off 100 percent of the time in order to make sure the passenger is safe. By utilizing gold as the conducting unit for this firing mechanism, it insures passenger safety 100 percent of the time rather than using other metals, which have been known to rust.
Silver, the best conductor in the world
Many in the investing community debate as to whether silver or gold is a better investment as a hedge. In terms of usefulness, gold actually has a bit less appeal than silver, as silver is a better conductor. Silver is a more commonly found metal, so it naturally has developed a much lower price point. This plus the generally perceived smaller appeal of silver as a jewelry metal has caused it to become less in demand.
Another excellent hedge against changing times, platinum continues to be one of the most resilient metals ever found. Unlike other precious metals, platinum has been known to have an extremely high tolerance for heat in addition to being an excellent conductor. This gives it a long term investing appeal and makes it perfect for manufacturing in automobiles and other high-powered machinery.
Palladium
Similar to platinum in its uses, palladium is a bit different in that it is a bit more flexible than platinum. They are both commonly used as catalytic converters in vehicles. Palladium has become a more mainstream option because of its flexible nature and is also pretty common when it comes to fuel cell technology and information technology.
