07 May, 2011

Precious Metals & Myths

There are a number of myths that surround the purchase of precious metals. People invest in these when the dollar begins to decline in relation to other currencies. These metals tend to maintain or increase in value when the dollar is falling. Other investments, such as CDs, actually lose money when that happens. This is because the value is more directly linked to the dollar. If you have a $10,000 CD and each dollar loses value, so does the CD.

Gold and other precious metals and stones have long been useful as a means of trade. The minting of coins accelerated this use by creating standard weights and values. Since the value of gold crossed monetary barriers, gold coins retained value regardless of their origination. Historically, if a nation's paper money devalues, precious metals begin to rise in price in relation to that currency. History shows that even if a country's monetary system fails, such as in Germany before World War II, gold and other precious metals retained their value and could be traded fro goods and services.

Some people believe that a precious metal is always valuable. This isn't the case. While gold and silver remained popular from early times, platinum did not receive the same respect in earlier years. It was too difficult to work with, which made molding it impossible until better technology came along in the late 1700s. Today, an ounce of platinum is worth more than an ounce of gold or silver. Rhodium, not even discovered until 1803, is even higher in price.

Many people believe the myth that precious metals are only good for jewelry and coins. This is definitely not true. While these are primary uses for precious metals, there are many others. Silver, for example, has uses in photography and, of course, silverware. Gold finds use in computers, dentistry, aerospace and medicine. Rhodium is used to manufacture aircraft and in cars. Platinum coats missile nose cones, makes corrosion resistant products and jet engine fuel nozzles.

There's a myth that the heavier the item made from a precious metal, the more valuable it becomes. Often, heavier items are only plated with a particular precious metal and the majority of its weight may come from the metal under the plating, often nickel or copper. And while German silver is very heavy, it isn't really silver but a mixture of less-expensive metals.

Another myth meant to encourage the purchase of older gold coins is that newer coins might be confiscated. During the Great Depression, President Roosevelt called in all the gold, except older coins. These received different treatment because of their value as collectibles. Today there is no sign that the government has any intention of confiscating gold. However, dealers often refer to that situation to help sell higher-priced gold heirlooms.

People often mistake titanium for a precious metal. It is not. There's an abundance of titanium on the earth. Jewelry made from titanium is often more expensive, but not because of titanium's rarity, but because it's quite expensive to process the titanium to a useable state.

Credit to eHow for the info.