Au or Ag? Learn the Basics of Precious Metals
By John Rothans, Chief Procurement Officer of U.S. Money Reserve
It’s always a good time to learn more about precious metals, but especially when National Coin Week rolls around. Join U.S. Money Reserve as we dive into the reasons to own gold, how gold compares to other popular asset classes, and more.
What Are Gold and Silver?
Gold and silver are two popular precious metals, meaning they carry importance because of their relative scarcity. Investopedia defines precious metals as metals that “have a high economic [importance], due to various factors, including their scarcity, use in industrial processes, and role throughout history as a store of value.”
Each metal appears on the periodic table of chemical elements. On the table, gold’s symbol is Au, and silver’s symbol is Ag. Both metals were discovered around 3000 BC. Also, around that time, it’s thought that tools started to be made with bronze (a period known as the Bronze Age) and that Egyptians invented paper and the modern-day calendar’s predecessor.
Fun fact: All of the gold ever produced in the world would fill fewer than four Olympic-sized swimming pools.
Why Do People Own Gold?
Gold isn’t the most expensive precious metal or the rarest precious metal, but it is the best-known precious metal. Gold’s star status rests in large part on its longtime use as currency. Furthermore, it’s the no. 1 precious metal for people who want to purchase bullion in the form of bars and coins. Most gold bullion is at least 99.5% pure gold. (For silver bullion, purity must be at least 99.99%.)
Central banks, which manage their countries’ monetary policies, keep gold in their reserves to manage risk, promote stability, and hedge against inflation and (in the U.S.) the value of the U.S. dollar.
People buy gold for similar reasons, such as the ability to:
- Protect against losses in other asset categories, including stocks and real estate
- Gain financial security in times of crisis
- Own a tangible, liquid asset
- Enjoy a hedge against inflation
- Diversify a portfolio
As for silver, many people buy this metal because it costs less than gold while serving many of the same purposes as its cousin.
How Does Gold Compare with Other Asset Classes?
For centuries, people worldwide have been using gold and, to a lesser extent, silver as a way to store wealth.
While the price of gold can fluctuate in the near term, the yellow metal has outperformed several other asset classes over the long term, such as stocks, bonds, and real estate.
Meanwhile, cryptocurrency, an asset class that recently has generated buzz, lacks any connection to tangible assets, and its price can swing wildly. “Cryptocurrency is an incredibly speculative and volatile buy,” the NerdWallet personal finance website reports.
Different Ways to Start Buying Gold
Shopping for everything from clothes to cars has become more accessible thanks to technology, and so has shopping for gold that you can touch.
If you’re in the market for physical gold (or silver), you can visit a reputable shop or check out a reputable online business like U.S. Money Reserve. You also can purchase gold by phone, again from a reputable precious metals company like U.S. Money Reserve.
Aside from physical gold in the form of bars and coins, you can turn to a gold ETF (exchange-traded fund), gold futures (financial contracts), or stock in a gold mining company. However, none of those three options gives you the ability to actually hold the precious metal in your hands.
No matter which method you pick, you can go slow. You might decide to start by buying one gold bar or one or two gold coins. Once you feel comfortable, you can then ramp up your allocation in gold.
Recommendations for how much gold you should keep in your portfolio vary.
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