Precious Metals 101

Are you looking for a quick tutorial on precious metals? Gold Bullion Bars and CoinsThen let's begin with the short list of precious metals commonly purchased to hold wealth.

  • Gold
  • Silver
  • Platinum
  • Palladium

All of these metals are hard to extract from the earth.

The mining difficulties coupled with the capital investment required to mine these natural resources truly makes them precious.

Silver Bullion Bars and Coins

Now you know why these commodities are purchased to hold wealth.

They are also used for industrial applications (see Market Applications below).

You can physically own these metals in coin and bar bullion formats of various sizes.

Please choose a link below for more details concerning gold and silver bullion options.

Spot Prices

Unfinished material values of these metals are largely determined by spot (market) prices. Each precious metal has its own spot price. Please click on the links below to see current gold and silver prices.

Bullion dealers use spot prices as benchmarks to calculate their prices. Please visit here to learn how gold and silver bullion prices are determined.

American Eagle Platinum Coin

Precious Metal IRA

For U.S. citizens, the government provides the option of owning the following physical metals (with minimum purity levels) in a
precious metal IRA:

  • Gold Bullion .995+ fine (purity)
  • Silver Bullion .999+ fine
  • Platinum Bullion .9995+ fine
  • Palladium Bullion .9995+ fine

Certain gold, silver and platinum government-minted coins are allowed in an IRA. Gold, silver, platinum and palladium bullion bars approved by NYMEX or COMEX are also permitted.

Additional key requirements for a precious metal IRA include:

  • You cannot take physical possession of these metals.
  • An approved custodian must execute the transactions.
  • The metals are stored in a vault controlled by the custodian.
  • Collectible (numismatic) coins are not allowed.

The possible use of these precious metals as stores of value is a prudent consideration.

American Eagle Gold Bullion Coins

Market Applications

The prices of these metals - in particular gold bullion and to a lesser degree silver bullion - tend to increase or decrease based on the public’s confidence in its currency and the society that backs it.

When confidence is low gold and silver prices tend to increase. Likewise, when confidence is high these prices often decrease.

Nonetheless prices of these metals can increase in a growing economy due to their industrial applications.

Gold, silver and platinum are primarily known for their importance in the jewelry industry. However, all three of these precious metals have other manufacturing applications.

Printed Circuit BoardFor example, silver is used to make electronics because of its superior conductivity.

This attribute makes silver a preferred material for connecting electrical circuits or components. Printed circuit boards are a perfect example.

The round silver bumps in the photo are silver solder points joining electrical components to a printed circuit board.

Unseen components (i.e. integrated circuits, capacitors) were inserted on the other (top) side and soldered into place on the bottom side.

You can find more details about silver‘s many industrial applications by visiting SilverInstitute.org.

Platinum and palladium chemically react with harmful gases emitted by automobiles by converting them to inert (harmless) by-products. This explains why these two metals are used to make catalytic converters.

Although less conductive than silver, gold is also used to make electronics including cell phones, computers and certain peripherals. Visit gold.org to learn more about the use of gold to produce consumer products.

Typically, as the global economy expands more electronics and cars are purchased resulting in increased demands for these metals. Therefore, as the economy grows, so can the values of these commodity investments.

Silver American Eagle Coins

Gold Bullion, Silver Bullion And Money

Historically gold and silver bullion were used as money. Nations and empires of the past used them as coinage or to back paper money. The US is no exception.

Countries did this since gold and silver bullion were difficult to mine. This difficulty prevented them from creating too much money … which also devalues a currency.

Silver Certificate

For example, the US Treasury Department used to issue silver certificates that looked nearly identical to Federal Reserve Notes.

The primary difference in appearance between the two -- one had
“FEDERAL RESERVE NOTE” at the top
and the other “SILVER CERTIFICATE.”

These silver certificates could be redeemed by the bearer for actual silver bullion. At the bottom of the photo on the left it reads:
“SILVER PAYABLE TO THE BEARER ON DEMAND.”

In 1964 the US Treasury Department stopped issuing silver certificates.

Production of 90% silver coins was also terminated by the US mint in 1964. They continued to produce 40% silver bullion half-dollar coins from 1965 thru 1970.

Prior to 1934, US gold coins and gold-redeemable certificates were also commonly used for commerce by the public. Production of these gold monies was terminated in 1933.

20 Dollar US Gold Coins (minted in 1926)

So there you have it. The US government issued gold bullion and silver bullion money during much of its history before the practice ended. Perhaps someday these metals will once again be used to back currencies. If not, physical gold/silver remain popular options for preserving wealth.

Ron Paul does excellent job of explaining real money vs. fiat currencies on the four-minute video included below.

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Please choose a link in my navigation bar (upper left) to learn more about precious metals.

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