Let’s face it: an industrialized society won’t get very far without metals. As more countries around the world enter their own industrial ages, demand for metal both as a building block and as an investment may remain strong.
All About Metals
There are two primary types of metals: precious metals, which include gold, silver and platinum, and base metals, which include copper and aluminum.
Many metals have crossover appeal and don’t serve just one purpose. For example, gold is primarily a safe-haven and used in jewelry, but there’s a small industrial component, as well. Silver is likely the most versatile metal of all. Not only is it a store of value in turbulent times, but it’s used as jewelry and very heavily used in industry.
Commodities are prized as a portfolio diversifier, thanks to their lower correlation with stocks and bonds. When investing in metals, however, it’s important to consider other fundamentals that may support any case for them gaining (or falling) in value. The two different metal types should be evaluated on their own merits because they’re not all influenced in the same way.
Consider platinum, which is heavily moved by changes in demand for automobiles. Platinum is a key component in catalytic converters and that accounts for much of its demand. When sales of cars plummet, platinum’s price often follows.
Global buying also has an impact on the prices of metals, particularly when it comes to buying from China.
Quickly expanding emerging markets, like China and India, require more raw materials – which includes base and precious metals – to keep growing at their phenomenal rates. When metal prices fall, China has been known to step in and build up their reserves, pushing prices back up. Just that happened with copper as recently as this summer.