When we think of precious metals, we envision dark underground mines and men in hardhats with rock picks trying to extract a gleaning nugget from a cavern wall.
Indeed, precious metals are naturally occurring chemical elements that are rare, lustrous, resistant to corrosion, have high melting points and high perceived value.
According to The Royal Mint, there are three key criteria that make a metal “precious”:
- It must be a naturally occurring metallic element. Gold, silver, platinum, and even unusual precious metals like osmium are all metals (in a chemical sense) and naturally occurring.
- It must be rare, meaning the amount of the metal found in the earth’s crust must be quite small.
- It must be valuable. A metal may pass the first two tests but if it isn’t prized and coveted by the masses then it does not qualify as a precious metal.1https://www.royalmint.com/invest/discover/gold-news/how-rare-are-precious-metals
And unlike paper money, credit cards or digital currency — precious metals like silver and gold have been recognized as money for thousands of years.
The Earliest Forms of Money
In the 7th century B.C. in Lydia (modern Turkey) and China, early coins were made from bronze and an alloy of silver and gold called electrum.2https://www.creditkarma.com/money/i/history-of-money But electrum had a short life according to University of Florida historian Flora Curta, as Croesus, the king of Lydia, began minting precious metal coins for use as money.
“Croesus began to strike coins in gold and silver, and by the time his kingdom was conquered by the Persians in 546 BCE, coins were already in use in all Greek cities on the western coast of what is now Turkey.
From there, they were adopted by cities in Greece as well. By the end of the century, there were more than 100 mints operating in Greece.”3https://ufl.pb.unizin.org/imos/chapter/gold-silver
Silver and gold continued to be used as money well into the modern era. And both metals subsequently became monetary standards. Silver was the monetary standard in the United States from 1785 to 1873. Gold became the basis for the international monetary system from 1870 until 1914 and then again in the 1920’s.
According to commodity researcher Kevin McElroy, gold in particular, seems to possess all the attributes that one would want in a medium of exchange.
“Gold’s qualities are the exact qualities you’d want if you were to design money. You’d want your money to be durable, rare, but not too rare, divisible, consistent, convenient and be recognized as such by a preponderance of people. Why durable? … Gold doesn’t tarnish, rust, dissolve, rot or blow away in a stiff breeze. Its durability means that the value it has today will not be eroded by common elements … Why rare, but not too rare? As we all know, an asset’s relative rarity is a huge part of its value. If gold could be easily mined, refined, or produced, you’d quickly see the value of your gold diminish as new supply flooded the market. But gold’s rarity means that the amount of gold supply is relatively static. You can’t print gold at will like you can with paper … So gold, more than any other known substance, displays the particular traits that humans require in their money.”4https://www.thestreet.com/opinion/golds-intrinsic-value-10973811
Gold continues to play a vital role in the modern international monetary system with some 57 central banks holding the precious metal to protect their fiat currency reserves.
A Variety of Uses Then and Now
For ancient civilizations, silver was an essential element — and its applications went far beyond coinage. According to the World History Encyclopedia, silver not only held great aesthetic appeal to the ancients, it had practical value due to its versatility:
“Most ancient cultures benefitted from specialised craftsmen, often working for the royal household, and given a dedicated area of the city to produce their shiny wonders. Jewellery, utensils, vessels, dishes, pepper castors, saucepans, figurines, masks, and decorative objects were made in silver. Silver, because of its high value, was widely used in objects related to religious rituals such as incense burners, relics containers, and votive offerings or dedications. Textiles were embroidered with silver thread, and items of clothing had pieces of silver sewn onto them. The metal was also widely used as an inlay material in such items as weapons, armour, furniture, and metal vessels.”5https://www.worldhistory.org/Silver
Today silver is among the most critical of all tech metals due to its unique conductivity. It is used in solar panels, circuit boards, semi-conductor chips, switches, mobile phones, EV batteries and even artificial intelligence.
Early cultures also had countless uses for gold beyond coinage. The yellow metal was used in jewelry, sculpture, adornment, medicine, dental work, and even burial tombs. According to The Metropolitan Museum of Art:
“The staggering amount of gold found in the tomb of Tutankhamun, the only ancient Egyptian royal burial to have been found in a relatively intact state, illustrates almost unfathomable wealth, but Egyptologists suspect that the kings who ruled into middle or old age were accompanied into the next life with even more numerous luxury goods.6https://www.metmuseum.org/toah/hd/egold/hd_egold.htm
For pharaohs, emperors, tsars, kings, and queens — gold was an enduring symbol of prosperity. There was perhaps no greater hallmark of power and status in the ancient world than the lustrous signet rings, golden wreaths, and Silla crowns of ancient dynasties.
Today, gold is also at the center of modern technology. An efficient conductor of electricity, it is used in switches, relays, and connection strips. It is found in televisions, GPS systems, computers, calculators, cell phones and according to Geology.com “almost every sophisticated electronic device.”7https://geology.com/minerals/gold/uses-of-gold.shtml
Strong Financial Diversifiers
The importance of silver and gold extends beyond their history as early money, their appeal as ancient symbols of wealth, and even their applications in modern technology. They are strategic assets for modern investors looking to reduce risk in their financial portfolios and retirement accounts.
According to global online incubator and start-up accelerator, Faster Capital, precious metals are critical for portfolio balance and protection.
“Diversification is a crucial aspect of any investment portfolio. It involves spreading your money across different investments to reduce the impact of market volatility. Precious metals, such as gold, silver, platinum, and palladium, have long been considered a safe haven asset class, especially during times of economic uncertainty.”8https://fastercapital.com/topics/the-role-of-precious-metals-in-diversifying-your-investment-portfolio.html
They outline five key benefits that make precious metals like silver and gold strong financial diversifiers:
- They are a hedge against inflation.
- They have a low correlation to other asset classes like stocks and bonds.
- They have a strong reputation as a store of value due to their long history of stability and global acceptance.
- They are powerful portfolio diversifiers that improve asset balance.
- They are high liquidity metals that can be easily bought and sold.
Unlike paper currency, silver and gold cannot be inflated or deflated. They have routinely been described as having “intrinsic value,” meaning value that is inherent and innate. The ancients would perhaps describe it as “true value” because it is essential to their very nature.
Silver and gold often move independently of the stock and bond markets and tend to have an inverse relationship with economic downturns and global chaos. For those trying to protect their retirement and preserve their wealth, these are among the most important attributes of these long revered and high-value metals.
This article was brought to you by Orion Metal Exchange, a top-rated precious metals dealer with “live” product pricing, full price transparency, and best-in-class customer service.
Call now for a FREE Investor Kit and up to $20,000 in FREE metals on qualifying purchases: 1-800-559-0088
1 https://www.royalmint.com/invest/discover/gold-news/how-rare-are-precious-metals
2 https://www.creditkarma.com/money/i/history-of-money
3 https://ufl.pb.unizin.org/imos/chapter/gold-silver
4 https://www.thestreet.com/opinion/golds-intrinsic-value-10973811
5 https://www.worldhistory.org/Silver
6 https://www.metmuseum.org/toah/hd/egold/hd_egold.htm
7 https://geology.com/minerals/gold/uses-of-gold.shtml
