Gold, Silver, Platinum, Palladium, Rhodium: Each Precious Metal Is Precious in Its Own Unique Way


In recent months and weeks,
prices of precious metals – gold, silver, platinum, palladium, and rhodium – have
been reaching new historical or multi-year record highs.

Still, when investing in precious
metals, you should remember that each precious metal is precious in its own
unique way.

Investing in gold is actually
boring
. First, gold prices are much more stable compared to most other assets,
particularly during periods of crisis.

Second, during periods of instability and higher price volatility, the price of
gold tends to have a negative correlation with the prices of other assets (see Picture 1 below).

The Price of Gold Tends to Have a Negative Correlation with the Prices of Other Assets

Third, the price of gold almost always climbs when the U.S. dollar exchange
rate declines and real, or inflation-adjusted, interest rates fall.

Investing
in gold will not make you rich. But in the long run gold maintains its
purchasing power very well.

A potential breakout of silver
prices above $50 per
one Troy ounce or even $100 per one Troy ounce spurred by the current rally in crypto and
gold prices has been one of the hottest investing topics in recent months.

From
a historical perspective, silver is highly undervalued
relative to gold.

This is
evidenced by a steep rise in the gold-to-silver price ratio (see Picture 2 and
Picture 3 below).

The Gold-to-Silver Price Ratio Can Be Very Volatile
Is Silver Ridiculously Cheap Relative to Gold?

However, your should remember
that investing in silver is somewhat similar to investing in cryptos. Expect
high intraday price volatility (see Picture 4 below).

Investing in Silver is Somewhat Similar to Investing in Cryptos Due to High Price Volatility

Historically, gold was
used to store value, while silver – the poor man’s gold – was used for
transactional purposes.

These days silver is primarily an
industrial metal. But most working  – and
still poor and indebted – people still cannot afford investing in gold today.
Thus, if you find investing in gold boring, just add some silver to your
portfolio. And I promise you that your investing life will become much more
exciting.

Platinum and palladium are more exotic
precious metals.
This is despite the fact that the Europeans encountered
platinum (“white gold”) in Central and South America back in the 16th-18th centuries. Platinum was a rarer metal than gold and for a long time
its price was higher than the price of gold. That is why in the music industry,
“going gold” refers to the sale of 500,000 records (albums or
singles), while “going platinum” represents the sale of 1,000,000 records.

Palladium has also been known to Europeans for
quite a long time since the early 19th century.  And it is also a rarer metal compared to gold
with the main palladium deposits being located in just four countries: Canada,
the United States, South Africa, and Russia.

Platinum and palladium are actively used in
catalytic converters in the automotive industry.
  In recent years, both metals have become
innocent victims of a fading electric vehicle mania similarly to lithium
whose price was down by more than 80% at one point.

But for those who are ready to
invest in even more exotic precious metals, there is rhodium. It is the rarest
and the most expensive precious metal of all.  If platinum and palladium are from 15 to 30
times rarer than gold, then rhodium is 100 times rarer.

Rhodium is also used in catalytic
converters, while its major deposits are found only in two countries: South
Africa and Russia.

The price of rhodium is
extremely volatile. During the crypto and meme coin craze in 2020 and 2021, it rose
almost 10 times to reach $29,500 per Troy ounce.

Since then it has fallen by 70%. Still,
rhodium with its current price of $5,800 per one Troy ounce is still
substantially more expensive than gold with its price of $3,345 per one Troy
ounce.

Alternative Precious Metals Have Been Getting More Expensive Relative to Their Oldest Siblings: Gold and Silver

One of the best ways to invest in
precious metals is to buy exchange-traded funds (ETFs) that use client funds in order to buy physical metals
stored in warehouses in Switzerland, the United Kingdom, or Germany.

Almost all major ETF issuers – Invesco, iShares, Xtrackers, Amundi, Wisdomtree, SPDR, and others – have
physical gold or silver ETFs available for both professional and retail
investors these days.

For particularly conservative
investors, there is a German-domiciled Xetra-Gold ETF which is a joint project
of the Frankfurt Stock Exchange (Deutsche Börse) and major German banks with
the participation of private Swiss banks. It provides an opportunity to withdraw
your investments in the fund in the form of physical gold.

There are also funds that allow
investors to invest in physical platinum and physical palladium ETFs issued by
Invesco or Wisdomtree, for example.

Still, the most rational way of investing
in precious metals would be to buy a physical precious metals basket
like the
Wisdomtree Physical Metals ETF or any other similar instrument. This ETF invests
around 60% of funds in gold, around 22% in silver, 12% in palladium, and 6% in
platinum, thus providing exposure to all four major precious metals. 

Is it possible to invest in physical rhodium?
Yes, it is. Though as of today only professional investors have been able to do
it by investing in the Xtrackers Physical Rhodium ETF. However, the ETF
market is very dynamic these days. That is why just keep asking your broker whether
this fund has become available to retail clients too.

What is the morale of this
precious metals story? The gold standard was completely abandoned in 1971. Since
then the price of gold has risen 75 times in terms of U.S. dollars, while the
price of silver has risen 28 times
(see Picture 6 below). The Swiss franc is
justifiably regarded as “paper gold” due its relative stability. Still, its
exchange rate has appreciated “only” 4.8 times in terms of U.S. dollars since
1971.

Roman Emperors Easily Beat U.S. Presidents When It Comes to Currency Debasement

The famous economist John Maynard Keynes once called the gold standard system a
“barbaric relic,” while the late business partner of the equally famous
investor Warren Buffett Charlie Munger believed that “…civilized people don’t
buy gold.”

Still, gold’s, silver’s, and other
precious metals’ appeal as investment products, safe assets, and simply as
jewelry metals does not show any signs of decline.

Robert Kiyosaki explained this peculiar fact
very well, “Commodities such as gold and silver have a world market that
transcends national borders, politics, religions, and race. A person may not
like someone else’s religion, but he’ll accept his gold.” In the other words, these are the safest
investments on Earth, period.


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