The Enduring Journey of Precious Metals in Investment History

The appeal of precious metals has lasted as an unshakable element in investing over every decade of human history. According to The Free Dictionary by Farlex, precious metals are rare and appreciated for their scarcity, industrial importance, and history as investment assets. Like other commodities, they are traded on commodity markets and can have volatile prices but tend to stay relatively valuable.

This voyage through history carries us across countries and millennia, diving into the tales of gold rushes, silver booms, and the birth of contemporary, complex financial instruments. We'll discover what makes precious metals such valuable safe havens in times of distress and beacons of riches and strength in times of success.

What are Precious Metals?

Precious metals earn their name due to their rarity. They have high economic value. Investors use precious metals to store wealth and pursue value growth. The most commonly invested precious metals include gold, silver, and platinum. Other examples comprise copper, iridium, osmium, palladium, rhodium, and ruthenium.

Precious metals are often called noble metals. They are less reactive and don't quickly react with other substances or the environment. This quality makes them resistant to damage.

Types of Precious Metals

The most popular types of precious metals are:

• Silver: Silver is lustrous and malleable. Silver coins are usually 99.5% pure. Not only coins but other bullion products of silver are often alloyed with copper for strength. Silver bullion can tarnish but resist corrosion.

  Silver is similar to gold but is also frequently employed in the industry. It is now priced similarly to gold in historical patterns, indicating growth potential, although it is more volatile than gold.

• Gold: gold is well-known for its long history as a safe store of wealth, although it's not used much in industry. It's a solid global monetary asset. Gold coins and bars or other commodities are measured in karats. It indicates how much pure gold is in the mix.

  The purest form is 24kt for gold bullion. Gold is blended with silver, copper, or nickel to make it durable. Different combinations create white, yellow, rose, and green gold hues.

• Platinum: Platinum is a durable, bright white metal resistant to fading and tarnishing. It's hypoallergenic. Platinum's density and weight make it sturdy and ideal for holding precious stones securely.

  It can scratch but is easily polished without much loss in weight. Platinum is used in industries, especially in car parts like catalytic converters. Like silver, its prices can go up and down more than gold.

These precious metals can create different types of bullion products for modern investing. These bullions are gold and silver coins, bars, medallions, and rounds. Throughout investment history, people have also chosen jewelry made of these precious metals as a direct mode of personal asset acquisition.

Ancient Origins of Precious Metals

Let's explore the history of Precious Metals from the beginning:

• Gold: People in ancient times admired gold for its shine and rarity. Its application started around 3600 BC in Egypt for making jewelry. Later, in 564 B.C., King Croesus of Lydia made the first standardized gold coins. The Romans expanded its use for money.
• Silver: It was one of the first metals discovered and used. In 1492 A.D., it became more valuable due to mass discoveries in South America.
• Platinum: Platinum became an officially recognized element in 1751 A.D., but it took until 1988 to have platinum bullion coins.

Today, precious metals are used for jewelry, modern investing, and in industries like electronics and cars. The United States generates 234 metric tons of gold and silver annually, while Mexico and China produce significantly more.

Role of Gold in the Monetary System

The gold standard ruled the monetary system from the 1870s to World War I. In the early 18th century, Britain tied its currency to a fixed amount of gold, which continued until World War I in 1914. While most European countries used silver as a basis for their currencies in the 19th century, France and others used gold and silver in a fixed ratio.

In 1871, Germany adopted the gold standard, leading to neighboring countries, including Scandinavia, adopting this monetary system. The United States had a bimetallic standard until 1900 when they formally adopted the gold standard. There was deflation from the early 1870s to the mid-1890s due to the limited gold supply, but discoveries caused inflation in the mid-1890s.

By the end of the 19th century, many leading countries linked their currencies to gold. It added stability to the international monetary system. The classical gold standard lasted until 1914.

During the interwar years, some countries used a gold bullion standard. After World War II, the Bretton Woods system pegged currencies to gold or the U.S. dollar. The U.S. dollar was pegged to a certain amount of gold under the gold standard. The government had large gold reserves, ensuring monetary stability and confidence. President Richard Nixon abolished the gold standard in 1971, known as the "Nixon Shock." Since then, the US dollar has been a fiat currency, meaning it is not backed by a tangible object such as gold but by faith in the government's capacity to manage its economy. Gold's importance waned, and the system collapsed in 1971. Central banks still hold gold today, but its reserve share has decreased.

Silver and Its Historical Applications

Silver is the second most malleable and ductile metal after gold. The symbol for silver is Ag. It came from the Latin word "argentum," which means off-white. When mined, silver is often found alongside minerals like lead, copper, and zinc.

Early silver mining began around 3,000 BC in Anatolia, Turkey, and later shifted to Greece. Spain became a major supplier to the Roman Empire by 100 AD. Between 1500 and 1800, silver mining saw significant growth, with Mexico, Bolivia, and Peru leading production.

Silver has played an essential part in American history, also with various historical usages. Silver has been crucial to the nation's industrial and monetary institutions since colonization, when coins were coined, and the 19th-century silver rushes in Nevada. The Coinage Act of 1792 created the United States Mint, which produced silver coins such as the well-known Silver Dollar.

Advancements in mining technology increased silver production worldwide. Throughout history, silver was used for decoration, medicine, and currency. It was considered a sacred metal in alchemy and connected to the chakra system. In the past, silver was used for detoxification and in photography. It's also a good conductor of heat and electricity in electrical applications. Today, silver is still famous for jewelry, luxury items, and as an investment.

Precious Metals in Times of Crisis

Precious Metals play a noteworthy role in times of crisis. However, many people wonder how much gold and silver bullion they need to survive an economic crisis.

Traditional advice suggests having 5-10% of the money in gold, but you may need more during tumultuous times. The question is, how much do you need to support your standard of living during a major financial disorder? The traditional recommendation of 5-10% in gold is a guideline for portfolio diversification during regular times. However, during major economic crises, the amount of gold you need to support your standard of living depends on your expenses, the crisis's duration, and your other assets. Creating a customized plan with a financial advisor is essential to ensure your financial security during tumultuous times.

You can also use both gold and silver bullion to meet expenses. For example, $1,000/month for two years would require 12 ounces of gold. While this amount may seem high, it can protect your standard of living and potentially improve it if silver and gold prices rise during crises. Now, saving in gold and silver can save you from spending more on currency later.

Investing in Precious Metals

In investment history, people have been buying precious metals in different ways, like getting coins or bars. Investment in Precious Metals is further simplified through banks or brokers.

Direct acquisition of bullion coins or bars is possible from Mints or reputable dealers. Converting metals into coins may cost extra; owning them can mean storage and insurance fees.

Investors can also invest in precious metals through funds and ETFs. These funds buy metals or invest in metal-related companies. Some funds focus on one metal, while others cover a range. Fees apply to these funds.

Another option for Investment in Precious Metals is financing metal futures or futures of metal-related companies. This modern investing involves buying or selling an asset at a later date for an agreed price.

Investing in physical precious metals can broaden your portfolio while shielding you from inflation and economic uncertainty. You can touch them and feel secure about it. Your precious metals portfolio might include gold, silver, platinum, and palladium, each with its potential.

You can purchase bullion coins and bars online from reputable dealers. Simply browse Bullion Mentor for the most competitive and lowest prices from reliable dealers to help you save money.

Precious Metals and the Environment

The impact of precious metals mining on the environment can be significant. There should be adequate measures in place to mitigate these consequences.

1. Physical Disturbances: Mining operations include open pits and waste rock disposal areas, which cause substantial physical disturbances to the landscape.
2. Soil and Water Contamination: Waste rock and tailings can contaminate soil and water. Erosion of waste rock into surface drainages may lead to metal concentrations in stream sediments. It also affects plant and animal life.
3. Air Contamination: Historical smelting operations released gas and particulate emissions. Emissions, such as sulfur dioxide, contribute to acid rain, which harms vegetation and causes barren areas near smelting sites.
4. Public Safety: Abandoned mining sites can be dangerous to the public. They may have open pits, entrances to underground workings, and old structures that pose risks. Ground sinking or subsidence can occur near underground workings, making these areas hazardous.

To guarantee that mining does not harm the environment, miners must adopt innovative technology and adhere to tight standards, like in the United States. It's essential to keep improving mining technologies to reduce their impact on nature. Projects that fix and make things safe, called reclamation and safety mitigation projects, greatly help. This must include warning signs, fencing off risky spots, and closing old mine entrances.

Conclusion

Precious metals are historically and economically significant. Having gold and silver bullion on hand during a crisis helps defend your means of life. You can invest in precious metals through coins, bars, rounds, or ETFs, but each has pros and cons. While mining these metals can impact the environment, following strict mining rules and using advanced technology can help to avert the issues.

FAQ's

1. When did precious metals start?

The answer is not clear. However, the Ancient Egyptians were the first to discover gold in Nubia around 2450 BC. Pure gold was first found by an Egyptian alchemist named Zosimo. The early mining of silver started in 3,000 BC in Anatolia, Turkey.

2. What is the historical significance of gold?

Gold is a precious metal used to back the U.S. currency system until 1973. People hoard gold for financial stability, inflation, war, or crises. Throughout history, gold's price has gone up and down. In 1980, it reached around $2,200 (adjusted for inflation) but fell below $400 in 2001.

Over the last 20 years, it has risen chiefly, peaking at almost $2,000 in 2020 and around $1,948.30 (Oct 2023).