There are two large categories of metals: precious metals and base metals. The metal's resistance to oxidation and corrosion serves as the basis for this classification. While base metals have a much lower tolerance for corrosion, precious metals have a higher resistance. In this book, we will be looking at two precious metals: gold bullion and silver bullion. We will look at the fundamentals of these precious metals and show you why and when it's a good idea for your investment portfolio to have some exposure to these precious metals. From what drives their price, including how they can be used as a gauge of investor sentiment regarding the stability and future of the economy, to investment vehicles, this guide will help you gain a better understanding of gold and silver.
All that Glitters May Not Be Gold... ...but its value cannot be denied. For thousands of years, gold has been used as a form of currency and has not lost its inherent value. Its metallurgical properties have made it a highly valued asset throughout the centuries, including its virtual indestructibility and rarity.
The Properties of Gold
Gold is one of the few metals to have an incredibly high level of resistance to corrosion. Exposure to oxygen, for example, has practically no effect on this metal, allowing it to retain its properties for thousands of years with no change. In terms of rarity, you are likely well aware that this is one of the rarest resources on the planet, and in over 6,000 years, ever since gold was first mined, only about 150,000 tons of gold have been extracted in total. This is a tiny amount, especially when compared to other metals. Another advantage gold has is that it is a very malleable metal, making it easy to shape into almost anything. This has made gold one of the favorite metals for jewelry makers all over the world. However, it is often mixed in alloys with other metals to allow it to retain its shape because in pure form (24K), it can be too soft to wear. Ductility is a measurement that refers to how much wire a certain amount of metal can produce. For example, one ounce of gold can be converted into more than 50 miles of wire that can be used in a variety of electronic applications, making it incredibly valuable in this industry.
The Value of Gold to Investors Gold's properties have allowed it to maintain its value for thousands of years, which makes it a great investment vehicle. However, you will find there are two schools of thought when it comes to gold and other precious metals. There are those who believe gold is a great hedge against currency devaluation and feel investing in gold is a wise course of action at any time, especially for capital preservation.
Then, on the opposite end of the spectrum are those who believe gold is a waste of time and money because it no longer has any value in the digital age and will soon be worthless to everyone.
While there will always be naysayers, no one can deny the fact that gold's value has remained unchanged since recorded history, which is why it was even used as currency for a lot longer than we have had paper money and fiat currencies. In fact, even when we switched to paper money, gold was still used to back the currency and it was only in 1971 that the gold standard was eliminated by President Nixon. Many feel this decision was what led to the continued devaluation of the dollar.
But wait, the price of gold fluctuates thousands of times daily. How can anyone say its value has remained the same? It's a good question and the answer is quite simple. We all try to figure out what something is worth based on its price, also known as its dollar value. However, since the dollar—or any other currency—is merely a piece of paper, the true measure of value would be the amount of oil one ounce of gold can buy.
