Our world is made up of so many interesting materials that it can be hard to keep track of them all. Some are so abundant that we barely give them a second thought, and yet others are prized so high that they can impact things like national currencies and the stock market. We’re talking about precious metals. You may have heard the term used before, but it can refer to different things depending on the industry. Most people are aware of the more common ones like gold, silver, and platinum, but what exactly is a precious metal, and why are they so important?
Precious metals defined
So what is a precious metal? The short answer is that it’s a metal that’s found in nature but at a rarer frequency than more common metals. So, for example, gold is a precious metal whereas iron is not and is instead a base metal. But once you start parsing between precious and base metals, things can get dicey. The traditional distinction between precious and base metals was that base metals were reserved for industrial uses. Meanwhile, precious metals were typically used for consumer purposes (such as jewelry) and were also so expensive as to be used for commerce and currency.
But over time, precious metals have proven their value for industrial purposes. So, these days “precious” versus “base” tends to be an investment distinction for those looking to shore up their portfolios. Precious metals all feature three core properties:
- Rarity: While they’re naturally derived materials, they’re harder to find and are found in less volume than base metals.
- Luster: Once polished, precious metals have a gorgeous shine — making them ideal for jewelry.
- Ductile: This term references a substance’s malleability. On the whole, precious metals can be formed into a variety of shapes of minute thickness without breaking, cracking or losing their durability.
How many precious metals are there?
In total, 10 precious metals are naturally found on Earth. You’re probably already familiar with some of them. Metals such as gold, silver, platinum, and even palladium are popular jewelry choices. But none of those tops the list as the rarest of the precious metals. That distinction belongs to rhodium, which tends to be used for industrial and commercial purposes rather than as a consumer good. This metal is highly reflective, conductive, and resistant to thermal change, making it an ideal material for use in industrial mirrors.
Precious metals and world currencies
So, how did these precious metals become linked with world currencies? To answer this, we need to take a short trip back through time. Historically speaking, valuable items have always been used as a way to barter for goods or services. The item could vary depending on what the group found useful. For some nations, it was wampum, and for others, it was jewels or metal hunks dug up from the ground. The earliest record of precious metals being turned into uniform coins dates back to the sixth century BCE. But the inventors of the first known unified currency system belongs to the Babylonians and the Code of Hammurabi, from the 17th century BCE.
Fast-forward to the 17th century CE, and the United Kingdom would be one of the best examples of a country with a representative currency — or one in which each coin or note in circulation was backed by an equal value of precious metals. In the case of the United Kingdom, we’re talking about the British Pound Sterling. This form of currency meant that there was never more money in circulation than there was gold in the banks. This currency system eventually gave way to the current fiat system in which national currencies are no longer backed by gold but are simply accepted because the government deems it legal tender.
There are many conversations for and against this form of economy, but that’s a topic for a different time. However, most financial experts agree that investing in precious metals is a great way to protect against economic instability and build a solid nest egg for your golden years.
Practical applications for precious metals
Currency aside, most people associate precious metals with jewelry. Of course, we all know about gold and the various levels of karats. Karat refers to the purity of the gold, with a low karat value meaning that there are other metals mixed into the gold. Meanwhile, 24 karats is the highest value and it represents pure 100% gold with no filler metals. Often what you can find is dependent upon the requirements mandated by a specific nation. For example, in the United States, you can’t legally sell gold that is less than 10 karats, while in many parts of Europe, the minimum is nine karats.
But aside from jewelry, precious metals have proven their worth in the industrial world. As we mentioned earlier, precious metals are sturdy materials that often feature essential properties such as high conductivity, heat-resistance, and malleability. Lesser-known precious metals like iridium, osmium, palladium, and ruthenium are often used in various applications including electrical work, engineering, and automotive design.