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Do Precious Metals Have Any Intrinsic Value?




People have been hoarding precious metals for millennia.
Gold is the most notorious one of them all, you might say, "the king of all precious metals", but silver is the second most common choice (considered less rare).
To the list we can add platinum (preferred by people with more refined taste), but we can go even further and say that palladium has also gotten fashionable.

And the list could go on with even more extravagant choices: indium, iridium, osmium, rhodium. but these are generally for industrial use and either not ideal for jewelry, are either too toxic or not solid enough for manufacturing hard objects.

Anyway, PrimeValues mainly focuses on gold, silver, platinum, palladium and even gemstones (which are not metals, but extremely important hard assets).

So, do precious metals have any intrinsic value? Are they valuable by themselves or is this just a "craze" around them?

Passion for beauty it is, nevertheless. and they're rare, so this kind of metallic beauty is understandably costly.

But what else can make them valuable?

Certainly these metals aren't just used for jewelry and for producing bullion products intended for solid investment. Some of them are intensively used in industries as well.

Gold, silver and platinum are all used in microelectronics and in electronics in general.


Below we'll check what else these metals are used for except jewelry and hard asset investment...


 Gold

Because it's non-corrosive, gold is used in various applications... It's a good conductor of electricity, therefore it's used in microelectronics. For example, the pins of certain integrated circuit panels, such as RAM modules are coated or entirely manufactured out of gold.

This metal is also used in cellphones and a variety of other electronic equipment.

Gold is also used in healthcare in treating diseases, such as rheumatoid arthritis, tuberculosis. Let's not forget about gold teeth - which were quite fashionable (a long time before synthetic teeth).


 Silver

From all precious metals, platinum and silver receive the biggest demand for industrial applications. Both are excellent conductors of electricity. Silver, for instance is used in solar panels, cellphones as an excellent transmitter of electricity, it's also used in thermal-conducting paste for the coolers of computer CPUs.


 Platinum

Apart from jewelry, platinum is used for vehicle control devices, electrodes, medical instruments, oxygen sensors, for engines (for instance, spark plugs), but also for anticancer drugs.

Despite being more rare than gold, it's quite undervalued (as of late 2012), costing a lot less than its shiny-yellowish rival.

Interestingly almost 77 % of the World'platinum is produced by South Africa. The vast majority of the rest is extracted in Russian mines (about 13 %). Only obscure quantities have been discovered in the rest of the World. Some other notable areas where platinum is extracted: Tamil Nadu (India), Absaroka Range in Montana (United States), Zimbabwe, Venezuela, Botswana.

Imagine how much South Africa contributes to the price-setting of platinum? Tremendously...


 Palladium

At first glance it resembles platinum. But it's roughly half the price (as of late 2012)...

Russia produces 44 % of the World's palladium and South Africa 40 %. Canada accounts with 6 % and the USA with 5 %.

The remaining 4 % is produced by various other countries in smaller quantities: Ethiopia, Australia, Zimbabwe.

Palladium is industrially used in the manufacturing of catalytics converters, watch making, electrical contacts, musical instruments, it's also used in the aerospace industry and in the medical industry.

Despite the fact that it is also used for manufacturing jewelry and investment bullion, it is slightly toxic!


Precious metals do have intrinsic value: otherwise they wouldn't use them industrially. In fact, in case of silver, the industrial demand is huge and it's consuming up much of this whitish shiny metal.

Experts believe that in fact it's mainly due to industrial demand that silver's price will be driven up on the international markets.

In the past, countries used to tie their currency to precious metals, like silver or gold.

In the past the US dollar had solid gold backing (in order to keep its value), but Richard Nixon decided to drop the gold standard. That's when the US dollar became fiat money. More about these issues you will find in an abundance of articles across PrimeValues.

Interesting thing is that older US dollar notes (for instance the blue seal dollars from the 1930s until the 1950s) were called "silver certificate notes" - linked to silver deposits held by the Treasury of the United States of America.

Currently, a large number of countries are holding tons of gold deposits. The gold acts as a safety asset, even if not directly linked to the currency. In case of emergency, a country may resort to sell part of its gold holdings. Among the biggest holders of gold is the IMF (the International Monetary Fund).

This is proof enough that precious metals hold tremendous value. If countries, banks and other financial entities (as mentioned above - even the IMF holds tons of gold) resort to these hard assets, than there are solid reasons behind these measures.

As a conclusion, in this article we have learned that precious metals indeed have intrinsic value (proven by the intense industrial use), therefore they're not loved merely for their beauty, therefore there are rational reasons for holding gold.







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