Learn the Difference Between Noble and Precious Metals
“Precious Metals” is a term we use all the time. But what does it actually mean? What makes a metal precious?
Certain metals have almost universally been agreed on as valuable since their discovery. Some have been precious and eventually weren’t (consider aluminum, which was once so valuable it was used for cutlery in Napoleon III’s court). But many have stood the test of time.
Precious Metals and Noble Metals
A noble metal is a metal that isn’t very reactive. Many metals will change when in contact with the air. Take iron and steel, for example. Leave a piece of steel out, and it will rust. Or copper — the Statue of Liberty was originally orange, but the green color is corrosion and that has changed it to the color we see today.
Noble metals are much less reactive than these base metals. They change less. It doesn’t mean they don’t change at all — you need only look at old Silver coins to see that. Silver will tarnish, and in the case of many shipwreck coins, they will blacken significantly. But an ocean bottom is a highly reactive environment.
This makes sense. If you were trying to establish a universal store of value, the logical way to do it would be to choose something that’s not going to change over time. Gold has held its value for 5,000 years for this reason — it’s one of the least reactive metals on the planet. Gold and Silver’s position as commonly-used coinage metals is mostly due to their lack of reactivity and their availability.
Not all noble metals are precious, but all precious metals are noble, including Gold, Silver, Platinum, Palladium and Rhodium. Though some of these do not see as much trading as others, they are still considered precious and traded for their intrinsic metal value.
Scarcity is also a factor. It was one of the most significant factors for aluminum (and one of the main reasons its value fell so severely after a reliable process for extracting it from bauxite was invented). Noble metals don’t tend to be common. Scarcity isn’t the only factor that affects a metal’s value, though. Platinum is scarcer than Gold.
The change in scarcity of Silver was one of the things that affected U.S. coinage significantly, as new mines in the American West caused a glut of Silver that temporarily halted the Silver dollar until new legislation forced the government to create coins to use it up. Silver’s spot price fell heavily in the wake of events like the discovery of the Comstock Lode.
Value vs. Industrial Use
Most precious metals are traded primarily for their use as a universally recognized store of value, but some are traded for their industrial value. These mainly include the Platinum group metals, mostly Platinum itself but also Palladium and Rhodium, among others.
Gold and Silver hold value in industrial applications due to their high conductivity and ductility. They are among the very best conductors of electrical current and are used instead of copper in applications where every little bit counts. But industrial uses do change. For example, the largest industrial use for Silver was in film processing. Now one of its major uses is in creating solar panels due to its conductivity.
Platinum group metals are also valuable for their conductivity, and they are used in specialty applications like catalytic converters in automobiles as well. These metals gain a large chunk of their value from their industrial use and are affected by this demand more than Gold and Silver are.
Most modern coins are made of non-reactive base metal alloys since Precious Metal prices make coins too valuable to be used for everyday commerce. Modern investment coins and bullion, though, are minted out of several different Precious Metals, including Gold, Silver, Platinum, Palladium and Rhodium.
Precious Metals have been a store of value for millennia and look like they will remain a store of value for many years to come. Whether made into coinage or kept in their pure form, their beauty, scarcity and industrial value make them a constant variable in human history.
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