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Overall, the precious metal investment market is the most volatile of investing markets. For those not in the know, a volatile precious metal is one for which the price changes sharply. The value of precious metals is prone to increasing and decreasing depending on recent events.
You may wonder: Are all of the precious metals available for trade prone to the same volatility, or are some more volatile than others? What causes these variances of stability versus volatility?
Today, we see four primary precious metals for investment:
These metals have diverse usages in different industries, and varied countries extract them using assorted methods. For these reasons, each of these metals has changing levels of volatility.
Below, we review the usages of each of these metals and their overall volatility. But first, let’s consider: What makes the precious metal market so volatile compared to other investment markets?
The number one reason why the precious metal market is so volatile overall is the weakness of the United States dollar. No matter where one is on the globe, the trade of metals occurs in U.S. dollars. Therefore, when the value of the U.S. dollar decreases, the price of precious metals will increase. In the same way, inflation can also cause the cost of all precious metals to rise.
How Is Gold Used?
Humans have used gold to create stunning jewelry and luxury items for thousands of years. In modern times, gold’s primary use is still for jewelry, but gold also has some applications in dentistry and technological projects. The vast majority of gold on Earth is above ground. While humans have not mined all the gold that’s in the Earth, geologists suspect we have already found most sources of this soft, yellow metal.
Is the Gold Market Volatile?
The beautiful yellow metal is the least-volatile precious metal in the market because gold’s primary uses are jewelry and trading. Some people view gold as a sort of ‘haven’ during times of financial duress because of its stability. At the start of the COVID-19 pandemic in April 2020, experts even named gold as the best precious metal in which to invest.
Gold tends to see an annual dip in price at the end of every year. Therefore, the best time to purchase gold as an investment is towards the end of each year, followed by selling it at the start of the new year.
You may wonder why the gold market is not more volatile, given its value. Gold’s stability comes from the two sectors that regularly purchase gold: jewelry brokers and precious metal investors. These two groups buy gold at different times.
When investors stop purchasing gold, the price decreases, and jewelry brokers step in. When the price rises, the jewelry brokers step out, creating space for the investors to come back. This dance is what causes gold to be more stable than some may expect.
How Is Silver Used?
Silver, while serving as the base in many pieces of jewelry, is also useful for industrial purposes. In the past, one of silver’s principal usages was for silver-based photographic film. However, since the introduction of digital photography, the market for silver-based film has plunged.
However, over half of the silver extracted today serves industrial needs—in batteries, medical equipment, and superconductors, to name a few industrial applications. Over time, scientists and industry leaders continue to find an increasing need for silver.
Is the Silver Market Volatile?
While not the most volatile precious metal in the market, the silver market is certainly more volatile than gold due to its use as an industrial material. The value of silver correlates to the value that jewelry brokers and silver traders give it and also to its use in various industries.
The industrial usage of silver has increased in recent years, especially in cell phone and solar panel production, among many others. Some of the properties that make silver in-demand for industrial purposes include its qualities such as:
- outstanding ability as a thermal and electrical conductor
- resistance to corrosion and oxidation
- antimicrobial, non-toxic attributes
- high luster and reflectivity
All of that said, while silver trading is undoubtedly a volatile market, it does attract interest when its price trends. Some also consider silver to be second only to paper money. Like gold, the silver market generally takes an annual dip towards the end of the calendar year.
Selling your silver at the start of the new year is sure to bring in a profit. Some investors consider silver to be relatively ‘small potatoes’ compared to other precious metals, but its volatility can make it a rewarding investment.
How is Platinum Used?
Platinum is a combination of both gold and silver. Being rarer and more valuable than either of these precious metals alone, platinum has earned the name ‘rich man’s gold.’
- The number one use of ‘rich man’s gold’ is in the automobile industry.
- Platinum helps create emission-reducing catalysts in cars and is also a catalyst in the petroleum and chemical-refining industries.
- Outside of industrial use, platinum also makes stunning jewelry, especially men’s jewelry, often denser and seemingly more ‘masculine’ than either gold or silver.
- Aiding the metal’s durability is its lack of reactiveness. Platinum is the least reactive metal that scientists know of, meaning that it does not corrode, tarnish, or rust.
Is the Platinum Market Volatile?
Just as some people claim the silver market to be the most volatile among the precious metals in the market, others consider the platinum market to be the most volatile precious metal. Platinum has more regular applications in industrial projects than silver does. Car sales and legislation regarding emissions from cars directly affect the price of platinum.
In addition, the geographic areas for platinum exist mainly in South Africa and Russia. These areas—South Africa, particularly—are prone to labor strikes and cartel activity that can cause the price of platinum to swing wildly.
Finally, since significantly less platinum extraction occurs in contrast to gold or silver, a smaller supply of platinum in the market is the result. These factors make the platinum market so volatile.
However, because of the increasing number of industrial uses for platinum, the metal can be a good investment for the right investor. As the industrial demand for platinum increases, so does the price of platinum. Platinum already has a history of selling for a much higher price than gold at certain times in history. Though platinum once had a reputation as a mere nuisance to gold miners, it has since become undoubtedly valuable.
How Is Palladium Used?
The least-known of the four precious metals available in the market, palladium is a sibling to platinum that people with untrained eyes often mistake for platinum. Like its sibling, palladium has a broad use in a variety of manufacturing processes. Outside of those processes, palladium contributes to products in dentistry, groundwater treatment, jewelry, solar energy, and medicine.
The first use of Palladium in jewelry was in the late 1930s, making it a recent addition to the world of valuable accessories. When combined with yellow gold, palladium forms an alloy that looks like white gold but is, in fact, a much stronger substance. This useful, lustrous white metal is malleable like gold or aluminum but becomes firm and even more durable than platinum when at room temperature.
Is Palladium Volatile?
Like its sibling platinum, palladium production occurs in only a small handful of countries. Rather than being mined directly, palladium is, instead, a byproduct of the production of silver and nickel. The fact that palladium is a byproduct means that it responds more slowly to change in demand, but that does not detract from its value.
Palladium has seen a relatively steady increase in value over the years as the demand for emission-reducing catalysts for vehicles has increased. In 2020, palladium became quite volatile in the market, with wildly positive price increases.
Despite palladium’s relatively recent entrance to the world of precious metal investment, the market has already proven to be quite volatile. So far, palladium has already seen large price increases—even doubling its value in just one year—to make it more expensive than gold.
A few main reasons for these increases are that:
- the increasing industrial demand for palladium, particularly in China, where the government is becoming quite strict about environmental regulations
- continued shortages of palladium
- Increased European purchase of more gasoline-dependent cars that use palladium in their construction instead of platinum
Invest In Precious Metals With Oxford Gold Group
Take the time to consider which precious metal you desire for investing—then guard your financial future by investing in that precious metal with Oxford Gold Group. We offer a selection of precious metals that we can deliver to you in various purity levels, in either bars or coins.