Precious metals have fascinated people for much of human history. Their rarity and durability made them uniquely suited to act as a form of wealth or a medium of exchange compared to materials that were either more common or that would degrade over time.
Precious metals are elements that are both scarce and inert. Their lack of chemical reactivity means that they don’t rust or degrade easily and can therefore last for extremely long periods of time. The oldest human-made gold object is believed to date all the way back to 4500 B.C.E., and it’s still intact today.
The Most Valuable Precious Metals
The five most valuable precious metals today are:
Gold: The value of gold comes from its durability, its versatility, and its traditional role as a store of value. It’s widely used in jewellery, coins, and as investment-grade bullion. Although it is used to some extent in aerospace and electronics, its two largest uses are in jewellery and as an investment.
When investors want to buy precious metals, gold is usually the first metal that comes to mind. To this day, central banks around the world invest in gold as a hedge against currency devaluation. In fact, 2022 saw central banks invest a record-topping $70 billion into 1,136 tons of gold, the most since 1950. The investment in gold was largely driven by emerging economies expanding their holdings.
Platinum: Platinum is a dense, unreactive, and malleable metal that’s silvery in colour. It is also the namesake for the “platinum group metals,” which include palladium, iridium, rhodium, and others. Platinum is often used in jewellery, and although it is not as common as gold or silver, it is also sometimes made into bars or coins and available as platinum bullion.
The primary use of platinum is in catalytic converters, accounting for roughly 50% of annual platinum demand. Europeans first discovered platinum in Central America, and the first quality that they noticed was that they could not melt it.
Palladium: Another metal regularly used in the automotive industry, palladium is occasionally also found in bar form and sold by bullion dealers, but it is not nearly as common as gold or silver. There are some concerns that the rise in EVs, which do not need catalytic converters, could negatively impact palladium prices.
Rhodium: By price, rhodium is one of the most expensive metals on the planet. It is both incredibly rare and very niche, used primarily in catalytic converters, as well as a glass-strengthening alloy, protective coating on jewellery, and in the chemical industry. Rhodium prices are highly volatile, having risen from $2,500 per troy ounce in January 2019 to over $28,000 per ounce in April 2021 before falling dramatically again. Most of the earth’s rhodium deposits are found in South Africa.
Iridium: One of the rarest metals on the planet, only three tons of iridium are mined annually. It is known as the most corrosion-resistant element on earth, resistant to water, air, and salt. Iridium is most commonly used as a strengthening alloy, and it is often used in the making of crucibles.
How Does Silver Fit into the Precious Metals Market?
You may be surprised to learn that silver is not one of the most valuable metals in the world. Compared to metals like gold, platinum, rhodium, and others, silver is remarkably affordable, but it is still considered a precious metal because of its scarcity, its historical role as a medium of exchange and store of value, and its availability in the form of bars and coins.
Silver may be the lowest-priced precious metal, but it has been used as a store of wealth for thousands of years. It was a critical part of the money supply in many civilizations, as the silver standard was used to back currencies around the world until it fell out of favour in the 20th century for the global gold standard.
Silver fills an important niche for retail investors as a more affordable and accessible bullion investment. The silver market is affected by many of the same factors that impact gold prices, and the two markets often (though not always) move in tandem.
Silver bullion dealers can help investors choose the right products for their investment goals, including different types of silver coins, rounds, and bars. The price of the metal may not compare to niche metals like rhodium or iridium, but its more widespread availability is what makes it useful for investors.
Where Are Precious Metals Mined?
Where do these precious metals come from? Part of the value of precious metals comes from their scarcity. Some rare precious metals are found in very few places in the world, while others are more widespread.
The top five gold-producing countries are China, Russia, Australia, and the United States. Gold can be found around the world, typically occurring in rock formations and alongside other minerals and metals like quartz and silver. Gold can also be found in waterways that have flowed through rock formations that contain the metal.
When it comes to silver, Mexico is the world leader in mining, alongside China, Peru, Chile, and Russia. Platinum is found primarily in South Africa and Canada. Russia is the world’s largest producer of palladium, followed by South Africa. South Africa is also the source of 80% of the world’s rhodium and much of the world’s iridium, and it is often found as a by-product of nickel mining.
How Much Precious Metal Is Left in the World?
Could we see the end of new gold supply in our lifetimes? It’s a complicated question, and the quantity of remaining precious metals is different for each metal.
The gold left in the world is broken down into two categories: reserves and resources. Reserves are quantities of gold that can be mined economically at current gold prices, while resources are gold deposits that exist in the earth’s crust but may not be extractable until higher prices or innovations in technology make it economically viable.
Currently, there are an estimated 50,000 tons of gold reserves left on the planet, and about 3,000 tons are mined each year. If that remains steady, there would only be about 17 years of gold supply left. However, higher prices and new technology are likely to open up new resources.
In addition to gold that remains below ground, very little gold is consumed irretrievably in industrial applications. Most of the gold that has been mined in human history remains above ground. It’s a metal that is going to be with us for a very long time, regardless of what happens to new supply.
When it comes to platinum, there are still about 70,000 tons left in the earth’s crust, the majority of which can be found in South Africa, and there are an estimated 100,000 tons of palladium remaining. When it comes to rarer platinum group metals, both rhodium and iridium are very rare. Annual production of rhodium is only 750,000 troy ounces or 23 tons, and only 3 tons of iridium.
How Are Precious Metal Prices Determined?
If you are going to invest in precious metals, you should understand how markets determine the price of bullion. As is the case with most commodities, the price of precious metals is largely a function of supply and demand, as well as speculation around where those factors are trending.
When it comes to precious metals like platinum, palladium, rhodium, and iridium, most of the demand comes from industrial applications, as well as some jewellery. They function similarly to most commodities, where growing economic activity and consumer spending tend to drive prices higher. With high usage in the automotive sector, prices are highly affected by performance in the auto sector, as well as restrictions on supply.
Gold prices can also be affected by high consumer spending, as much of it is used in jewellery. Consumer spending in China and India can also impact gold prices, as those two countries are two of the largest consumers of gold in the world. However, the most important factor affecting gold prices tends to be investor sentiment and larger market forces.
Gold is used as a hedge against inflation and as a safe haven asset during periods of market volatility. When the market becomes unpredictable, more investors put their money into gold, including bullion.
When you take your own gold to authorized gold dealers, you may not be able to expect the market price that you can look up online. This is known as the spot price, and it is largely used as a reference point for retail gold transactions. It’s the price at which massive volumes of gold are traded, typically between banks. For retail gold transactions, there are costs to consider, such as shipping, insurance, and overhead for authorized dealers.
There is also a precious metals evaluation process, where bullion bars and coins are weighed and tested to make sure they are authentic. The final price you receive will also be impacted by the purity of the coin or bar. Higher-purity products will fetch a higher price. For example, .9999 gold will get a higher price than .999 gold.
What Can Precious Metals Add to Your Portfolio?
Investing in precious metals is a great way of balancing your portfolio. Exposing your portfolio to commodities can further your savings by adding assets other than stocks, bonds, and deposits.
Precious metals like rhodium, iridium, and palladium can be highly volatile. These rare precious metals have in the past shown enormous price growth, as well as steep slides. They can be quite risky for investors who are not glued to the markets.
Gold serves a fairly different function in your portfolio. Prices tend to be much more stable than precious metals that have more industrial applications. Gold is frequently used as a safe haven from market volatility, which means it serves a very different role in your portfolio from other precious metals.
Talk to a bullion dealer about making the right investments for your goals. They will help you purchase the right metals for your goals. Not all precious metals are the same. Do your research and find out what their markets are like.