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Introduction
Precious metals are metals that are not abundant in nature and have a high economic value due to various factors, including their scarcity, use in industrial processes, and role throughout history as a store of value.
In the past, precious metals played a central role in the global economy because many currencies were either physically minted using precious metals or else backed by them, as in the case of the gold standard. Today, however, investors purchase precious metals mainly as a financial asset. The single most popular precious metal for investment purposes is gold, followed by silver.
Precious metals can be divided into two broad categories, they are:
Gold
Gold is the most well-known precious metal for many reasons, but the most noteworthy is its strong ties to global economies throughout history. Used as currency in the U.S and elsewhere for 100 years, this makes it inherently valuable and can still be exchanged for fiat currency. While gold is not the rarest precious metal, it still isn’t nearly as common as other metals found abundantly in nature. These two traits, rarity and use as currency, combined put gold in the precious metal category.
Gold is not only popular for its economic connection, it’s also the most popular precious metal for bullion investing. Most investors prize gold bars or coins as their most valuable bullion asset. Gold is malleable and can be shaped into bars called ingots or gold coins with beautiful designs, making them popular with investors and collectors alike.
Silver
If gold is the most well-known precious metal, silver is easily second. Silver has more industrial uses than gold so it’s valuable as both currency and for its industrious properties. All precious metals also have a level of rarity; silver is no different. These three characteristics, use as currency, rarity, and use in various industries, makes silver a precious metal and a very important one! Silver has the highest electrical and thermal conductivity of any elements and has the lowest contact resistance.
Silver is second in popularity and bullion investing. Just like its gold counterpart, silver bullion is found in both bars and coins. Silver is popular choice for bullion if you’re just starting because it is less expensive than gold, but still valuable.
Platinum
If there was a ranking on “preciousness”, platinum could be considered the most precious of all the precious metals. It’s 15 times rarer than gold! It’s also more ductile than gold, silver or copper. Because it has remarkable corrosion resistance it’s used in a wide variety of important applications like catalytic converters and lab equipment.
Platinum is also a bullion, like gold and silver, that’s struck into coins or bars. Platinum bullion has its own advantages and disadvantages when it comes to investing. During periods of economic prosperity, platinum’s value tends to rise. During times of economic uncertainty, its value tends to decrease. This is the opposite of gold, making them complementary portfolio pieces.
Palladium
Palladium is related to platinum, as they both belong to the elemental category called platinum metal group or PGM. It also has some of the same uses as platinum especially with its use in catalytic converters. More than half of the supply of Palladium is used in this manner.
Palladium is also an investable precious metal! It’s a relatively new investable precious metal when compared to its counterparts. The first palladium coin was issued by Sierra Leone in 1966. The United States just started striking Palladium American Eagles in 2017. Currently, palladium is still low on the radar of some investors, but as more mints create palladium bullion, we will see it gain popularity.
Ruthenium, Rhodium, Iridium, Osmium
These precious metals all belong to the same group as platinum and palladium, PGM. This entire group of metals are considered precious metals because they share similar properties and are found together in nature. Although ruthenium, rhodium, iridium, osmium are not used for investment purposes, they are important in various industrial applications like electrical and automotive spaces. A common characteristic they share is their extreme density, making them strong, durable precious metals.
Ruthenium, Rhodium, Iridium, Osmium
These precious metals all belong to the same group as platinum and palladium, PGM. This entire group of metals are considered precious metals because they share similar properties and are found together in nature. Although ruthenium, rhodium, iridium, osmium are not used for investment purposes, they are important in various industrial applications like electrical and automotive spaces. A common characteristic they share is their extreme density, making them strong, durable precious metals.
Supply
For investment precious metals, new supply comes to the market from mining production and recycling of scrap and obsolete material. Mining product accounts for between 70% to 85% of the total new supply, depending on the metal, with recycled material accounting for the remainder. The proportion fluctuates with time, reflecting the changing cost of production, reclamation values and the economic outlook, amongst other factors. The best estimates currently available suggest that around 205,238 tonnes of gold have been mined throughout history, of which around two-thirds has been mined since 1950. If every single ounce of this gold were placed next to each other, the resulting cube of pure gold would only measure around 22 metres on each side.
1. Jewellery: 94,464 tonnes, 46%
2. Bars and Coins (including gold backed ETFs): 45,456 tonnes, 22%
3. Central Banks: 34,592 tonnes, 17%
4. Other: 30,726 tonnes, 15%
5. Proven Reserves: 53,000 tonnes
Demand
Investment demand is a significant element in the market for precious metals and has an important role to play in establishing market prices for the precious metals. Gold is the most widely held investment commodity. Apart from being held in the form of jewelleries and bar and coins for private investments in gold, central banks hold a significant amount of their reserves in gold.
Gold’s diverse uses mean different sectors of the gold market rise to prominence at different points in the global economic cycle. This diversity of demand and self-balancing nature of the gold market underpin gold’s robust qualities as an investment asset.
This is a comprehensive time series of gold demand – broken down by sector – and gold supply – broken down by mine production, recycling and producer hedging.
Source: Date as of 30 June, 2021 (Supply Statistics)Central Banks, Federal Reserve Bank of St. Louis, International Monetary Fund, World Bank, World Gold Council;
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Source: Date as of 30 June, 2021 (Demand Statistics)Central Banks, Federal Reserve Bank of St. Louis, International Monetary Fund, World Bank, World Gold Council;
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Central Banks
Gold has been an essential component in the financial reserves of nations for centuries, and its appeal is showing no sign of diminishing. Gold plays an important part in central banks’ reserves management, and they are significant holders of gold.
The central banks are responsible for their nation’s currencies but these are subjected to swings in value depending on the perceived economic conditions of the nation. At times of needs, such as the measures to support the economy during Covid-19 pandemic, the central banks round the world were forced to increase money supply. The increase of money supply resulted in the devaluation of currency. Meanwhile, gold is a finite physical commodity whose supply cannot be added easily. As such, gold is usually used as a hedge against inflation.
As physical gold carries no credit or counterparty risks, it serves as a source of trust in a country, and in all economic environments, making it one of the most crucial reserve assets worldwide, alongside government bonds.
The following gold reserve data – obtained from World Gold Council, compiled using IMF IFS statistics – tracks central banks’ reported purchases and sales on a quarterly basis.
Source: Date as of 30 June, 2021 (Central Banks Gold Reserves)Central Banks, Federal Reserve Bank of St. Louis, International Monetary Fund, World Bank, World Gold Council;
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Three-Step
Gold and silver are precious metals which most people are very familiar with. Gold has existed for millennia and has proven its use as monetary metal. On the other hand, on top of being used as monetary metal, silver is also a ubiquitous industrial metal commonly seen in the energy, electronics and medical industries.
The steps below are the guidance for a wise investor to purchase physical bullion.
Choose Your Metals
There are four previous metals, which are Gold, Silver, Platinum, Palladium that are mostly known by people around the world.
The Reason To Buy London Good Delivery – Gold And Silver:
| - | Only gold and silver bars that meet the LBMA’s Good Delivery standards are acceptable in settlement of a Loco London contract. |
|---|---|
| - | The requirements for listing involve a stringent set of criteria, which include a minimum level of production and tangible net worth, with a rigorous technical assessment to review casting, refining and assaying abilities. |
| - | LBMA also conduct an annual check to ensure that refiners continue to meet the minimum requirements for refined production and tangible net worth. |
| - | Refiners that no longer meet the minimum standards, or those that decide to stop producing Good Delivery bars, are transferred to the Former Lists for Gold and Silver. |
You can check the Good Delivery Current Gold and Silver list here.
Know The Price And Premium
Physical precious metals products generally have a higher price than the spot price for that particular precious metal. The difference between the price for a certain bullion product and the spot price is called the price premium. Sensible investors will evaluate bullion options by price and premium of the precious metal spot price. A savvy investor should find out the spot and premium price of the precious metals before deciding to buy precious metals.
For instance, the investor can refer to the international benchmark pricing chart from e.g. LBMA Precious Metal Prices.
By analysing the chart, the investor obtains more details from the market and enhance the decision-making process. One percent of intraday price swing is common in the gold market.
Get Allocation Of Physical Precious Metals
After you have purchased bullion with us, you may choose to store your precious metal(s) with our Jin Huang Bullion’s vault or take the physical delivery of the purchased bullion from us.
Savvy investors would leave the custodian to the professionals and only take physical possession of the precious metals when necessary. Storing your precious metals in secure vaults will make your precious metals more marketable when you would like to sell your metals in future as the chain of custody is maintained.
By appointing us as your professional custodian, your precious metals are handled in utmost care. You are the legal owner of the purchased precious metal(s) at all times. All bullion bars have unique serial number and individually identifiable. Also, you are always welcome to inspect your precious metals in our vault.
The example of critical features of gold bars an investor should lookout for when investing in physical bullion.
Vaults
Jin Huang Bullion offers fully-secured and strategically located storage facilities the globe. Bullion products such as gold, silver, platinum, and palladium are stored in specially designed vaults.
