The Beginners Guide to Precious Metals and Inflation

Fine Gold

Buying gold Krugerrand, like those that you can purchase at Money Metals Exchange, is one easy way for novices to start investing in precious metals. As a form of investment, precious metals are one of the wisest choices that beginners can make. Precious metals not only provide diversity to an investment portfolio, but they also have numerous advantages including being resistant to inflation.

Krugerrands are gold coins from South Africa and, along with bars, gold coins are the most common physical forms of precious metals that experts refer to as bullion. While there are other means to invest in precious metals, acquiring them in their physical form is the least complicated way for beginners to get involved in precious metal trading. So, what makes precious metals good investments, and why are they resistant to inflation? Here is a primer for how you start investing or engaging in precious metals trading.

Precious Metals 101

Precious Metal Gold

What makes precious metals, well, precious is that they are rare, and some may be surprised to know that the world only produces a small amount of these elements annually. Apart from their attractive physical appearance and durability, their scarcity is the main reason for their high value. Gold is easily the most popular precious metal on the trade exchanges, with silver and platinum rounding out the top three. As beginners become more adept at trading, they may also look to invest in other precious metals like rhodium, palladium and copper.

Throughout several millennia, humans have regarded gold as a valuable commodity and have been using it as a measure of wealth and as currency. Around 10 percent of annual gold end up in electronics and the medical industry, 50 percent become jewelry and the remaining 40 percent as holdings or “hoards” by governments and private investors. Most of the world’s gold production is above ground with governments owning 30 percent of it as part of their foreign exchange reserves.

Silver, on the other hand, is a byproduct of mining for other metals. About 70 percent of it is a byproduct of gold mining. This precious metal is also a byproduct of mining for other metals including copper, lead and zinc. Like gold, it also has industrial applications in devices like computers, phones and solar panels.

Many consider platinum as more of an industrial metal just like silver. The majority of the demand for this metal comes from the automotive industry, jewelry, petroleum and the computer industry.

How Inflation Affects Precious Metals


Inflation hardly affects precious metals at all. By definition, inflation is the steady increase in the cost of goods and services. It is also during an inflationary spell when basic paper currency loses its value and purchasing power.

Unlike paper currency, however, precious metals have an intrinsic value that is almost immune to the factors that cause inflation. Precious metals are among what experts call “real assets” in that they are physical assets that have inherent value. Other examples of real assets are oil, real estate and equipment. During an inflationary period, the demand and the price of precious metals increase in contrast to paper money.

Among real assets, precious metals are a more desirable form of investment because their status as as indicator of wealth remains constant throughout recorded history. It is highly unlikely, therefore, that their desirability will diminish in the near future.

How to Start Investing in Gold

Gold Investment

Purchasing bullion like coins and bars is a good way for beginners to start investing in precious metals. It will be wise to do your own research before purchasing from an authorized and licensed precious metals trader. Some sellers offer storage, which can be an issue for those who are just starting out.

As you progress in investing and trading precious metals, you’ll want to explore other means of acquiring these assets. Among these options include commodity exchange-traded funds (ETFs), futures and options, common stocks and mutual funds and certificates.

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