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Gold and silver have been held in high esteem since antiquity, hoarded as treasure by the Pharaohs of Ancient Egypt and used in adornments and jewelry by every civilization since. Even in today’s world, precious metals continue to excite, entice and are still being hoarded away by the pharaohs of the current age. Investors savvy enough to recognize their value as investments buy into precious metals as a hedge against inflation.
IMMFX Precious metals include gold and silver, referred to as precious because they are rare, malleable, ductile, and highly durable as well as being attractive with a high-unit value.
The Golden Egg
Gold is unique as both a commodity and a monetary asset. It is valuable because of its durability (no rust or corrosion) which makes it perfect as a base for jewelry. It’s also highly malleable, is a good conductor of both heat and electricity, and it’s hypoallergenic, making it very useful in industrial applications such as electronics and dentistry. There are several reasons for investing in gold:
- It is most often bought as a precautionary measure in times of financial and/or political instability.
- It has managed to maintain its value historically and is preferred over other assets (paper currency, for example) as a method of wealth preservation through several generations.
- It is a hedge against inflation as its price is directly proportional to the cost of living.
- The purchasing power of gold grows even during periods of deflation when the economy slows down and prices tend to decrease due to sluggish business activity.
- Increasing demand, coupled with supply constraints, as well as portfolio diversification are other factors contributing to the popularity of gold as an investment.
The Silver Lining
The market for silver has always been more volatile as compared to gold because its price tends to fluctuate according to how it is perceived. Popular and worthy both as an industrial metal and as a store of value, silver is the cheapest and most abundant of the precious metals. Known as the people’s precious metal, it has a history as a means of exchange spanning nearly three millennia and has been revered in the literature by authors for centuries.
Besides its use in electrical appliances, superconductors and micro-circuits due to its high conductivity, silver is fashionable in jewelry and silverware because it is highly reflective, soft, malleable, and has a relatively low melting point which allows it to be shaped into any form desired.
Precious metals can be traded on both rising and falling markets, provide effective portfolio diversification and cannot be inflated, providing unique protection as a hedge against inflation. While a tiny percentage of precious metals in a portfolio can reduce volatility and risk, the same volatility can lead to tremendous profits.
