Gold, silver, platinum and palladium, the primary, exchange-traded investment precious metals possess six inherent attributes in a special combination that make them unique. These include:

1. Beauty – Precious metals are used in many ways to enhance appearances, as in jewelry, for table settings, and in many other decorative ways.
2. Utility – They are used in a multitude of industrial and technological applications, ranging from catalytic converters and computers, to aerospace and telecommunications equipment. In fact, our modern way of life today would not be possible if it were not for the existence of precious metals.
3. Rarity – Precious metals are hard to find, and difficult and expensive to mine and refine.
4. Indestructibility – Virtually all the gold ever mined since the beginning of time still exists in some form today. Precious metals are always being recovered in their existing forms (platinum and palladium from used catalytic converters, for example), re-refined and used again and again.
5. Portability – considerable dollar value can be transported in a briefcase, suitcase, etc.
6. Inherent Value – the worth of precious metals is innate; that is, they don’t represent something else that has value, as does a stock or bond. Precious metal is, in and of itself, naturally valuable.

No other elements known to man exhibit all these characteristics in combination, and thus, mankind has therefore always considered these metals precious.

First, They Provide Protection Against Inflation and Serve As A Long Term Store of Value. The price of precious metals tends to rise when inflation is on the increase, and, quite simply, over the long haul, precious metals maintain their value. Consider, for example, the cost of a Ford Mustang in 1960 and then again in 2010, 50 years later. Its dollar price in 2010 was about $40,000, substantially higher than the $3900 it cost back in the early 1960s. Interestingly, that Mustang could have been purchased for only 30 ounces of gold in 1960 and in 2010. However, note that while the car’s real value as a mode of transportation did change during that period, it required about 10 times more dollars but 80 ounces to purchase the same vehicle fifty years later.

In other words, though the car costs over 10 times more in dollars, it could be purchased with fewer ounces of gold in 2010 as it could in 1960! In 1960, the market price of gold was $35 per ounce, while in 2010 it was about $1400 per ounce. Almost any other item one can name could also be purchased for less gold today than it could have been 50 years ago.

QUESTION: Considering the increased number of dollars needed to buy the Mustang less over that period, ask yourself -- has the value of gold risen, or has the value of the dollar declined during that time?

ANSWER: The Mustang’s value as a mode of transportation remained constant, and its cost in terms of gold actually decreased. However, it required 1000% more dollars to purchase it 50 years later. Thus, during that period, the value of the dollar clearly eroded quite severely.

Second, They Enjoy a High Degree of Liquidity. Unlike most stocks, precious metals trade in major markets around the world, twenty-four hours each business day. In their most common forms, precious metals bullion investments are recognized, accepted, and can be readily bought or sold through a global network of dealers.

Third, They Represent An Excellent Means of Portfolio Diversification. Studies show that precious metals provide a vital balance to assets such as stocks and bonds in that their inclusion tends to reduce the fluctuations in the value of one’s total investment portfolio. For example, when the stock market crashed on October 19, 1987, the gold price moved decisively up even as stocks (including most gold mining shares) experienced one of their greatest one-day loss in history. Thus, under some market conditions, precious metals can actually outperform stocks and bonds and increase your portfolio’s total return.

Fourth, They Are Tangible Assets. The value of physical precious metals is inherent. This is to say they do not rely on some outside institution, company or government to imbue them with value, as is the case with currency, stocks and bonds. They have market value in and of themselves. They have innumerable practical and necessary uses in industry and are recognized as a universal medium of exchange. Moreover, precious metals are the only liquid assets in existence that do not depend upon a company's or a government's creditworthiness and good faith for their value. Thus, they are the only asset that is not someone else’s liability. In fact, gold is often referred to as a currency without a country.

Gold

1. Gold is the most widely traded of the precious metals.
2. It is primarily a monetary metal used in coinage in many countries. In fact, national governments hold more than 1/3 of all gold in existence as national reserves.
3. Because of its popularity, there are more forms of coins available in gold than any other type of precious metal.
4. As an industrial commodity, gold is used extensively in the manufacture of jewelry, and in electronics, dentistry and many other commercial and scientific applications.
5. On average, four tons of raw ore are required to produce one ounce of pure gold.

Silver

1. Silver is the least expensive of the precious metals.
2. It also is a monetary metal used in coinage.
3. Silver is primarily an industrial metal used in electronics, dentistry, jewelry and photography.
4. One ton of raw ore is required, on average, to produce five ounces of silver.
5. Typically, silver is mined as a by-product of copper extraction.

Platinum

1. Platinum is far more scarce than gold or silver.
2. It is called the "hi tech" metal and is used in catalytic converters, electronics, jewelry, oil, fertilizer, and chemical production, among many other industrial products.
3. Platinum’s price tends to be the most volatile of the precious metals.
4. On average, approximately ten tons of raw ore are required to produce one ounce of pure platinum.

Palladium

1. Palladium is an industrial metal commonly alloyed with platinum.
2. It is also a "hi tech" metal, and used in a wide variety of industrial and production applications.
3. It is one of the most anti corrosive elements known.
4. Palladium platinum alloys are used in 20% of the world's manufacturing processes in some way.

There are advantages and disadvantages to each type of precious metals investment vehicle. The answer rests largely with the investment objectives and risk tolerance of the investor. There is no single correct answer for every investor.

As stated previously, physical precious metal is inherently valuable and represents the only asset class that is not someone else’s liability. “Paper” precious metals investments, however, present considerably different risk-reward considerations. When purchasing an ETF, for example, one owns a share of the trust that holds precious metals bullion, but not the bullion itself. Investing in precious metals futures and options can be complicated, and, while they can leverage one’s gains, they can also maximize one’s losses. Buying shares in a mining company provides ownership in an entity that produces gold or silver, but not direct ownership of the commodities themselves. Management’s capabilities, environmental factors, the potential for political turmoil, nationalization of a mine by its host country’s government, and a host of other serious considerations need to be taken into account when selecting a mining company to add to one’s investment portfolio.

Thoroughly researching the pros and cons of each alternative and consultation with competent investment advisors can help an investor choose the proper alternative, or mix of alternatives, to suit his or her own particular financial circumstances.

Bullion bars are bars of investment grade precious metal manufactured by a commercial refiner. They are produced in different sizes and typically bear four distinguishing marks that identify them. These marks include the refiner’s mark (i.e., the bar’s brand name), the gross weight (usually in troy ounces), the bar’s fineness, and a serial number. Bars do not have legal tender status and their price in the market varies with the bullion price of the precious metals they contain.

Bullion coins, on the other hand, typically are produced as un-circulated precious metal legal tender coins by the mints of national governments. Like bullion bars, their price in the market varies with the bullion price of the precious metals they contain. Because of their legal tender status, they come with the guarantee of the government that minted them.

Rare, or “numismatic” coins, are collected and valued for their scarcity, individual beauty and special uniqueness, similar to a prized art piece or item of antique furniture. Some numismatic coins are “pure” precious metals, while many others contain little or no precious metal at all. However, their special collectible qualities can potentially render rare coins far more valuable in the marketplace than the value of any gold or silver that they may just happen to contain.

There is no single answer to this question that will satisfy every investor. When making an investment in precious metals, an investor should carefully consider his or her investment objective, the amount of money he or she plans to invest, and the need for liquidity. For example, an individual making a $150,000 long term investment in gold may decide to purchase a 100 ounce gold bar because the premium (i.e., manufacturing cost over the spot price of gold is low. Another may choose to buy 10 ten-ounce gold bars because the investor wants the flexibility to liquidate his/her gold in small increments should the need arise, or because he/she wishes to pass along wealth to a number of heirs. Yet a third investor may want to make small, regular investments, and will therefore choose to accumulate one-ounce gold coins.

The variety of bullion products may seem overwhelming and the "best" product may very well be different for each investor. However, it is the variety of alternatives available that allows investors to tailor their portfolios to meet their particular needs.

Coins typically have higher premiums than bars because extra and more demanding manufacturing steps are required to produce them. When producing large bars, manufacturers essentially just pour molting metal in a mold, allow it to cool and solidify, and then stamp them with their appropriate identifying marks. Producing coins involves more complex and costly minting processes. Also, bullion coins have legal tender status, which imparts a guarantee of authenticity from the government that minted them. Regarding cost, a general rule of thumb to keep in mind when buying either bullion coins or bars is that the smaller the size of the bullion item, the higher its premium cost will be over the price of the pure precious metal it contains.

First, precious metals prices are constantly changing minute-by-minute, hour-by-hour as they trade on markets around the world. Newspapers typically list the previous day’s closing prices for the respective metals’ futures contracts, though some may list yesterday’s physical (i.e., spot) prices. The New York “spot prices” are for metals delivered in large quantities “on the spot” in New York, while the London Fixes are prices for precious metals bars delivered in London at a given moment in time. As mentioned earlier, market values change constantly throughout each trading day, and the price a dealer quotes you is for a particular bullion product at that particular moment in time. The dealer’s quote may also include imputed manufacturing and variable administrative costs, such as handling.

Typically, there are two types of custody programs available through precious metals dealers: individual safekeeping accounts and commonly held, or “pooled”, accounts. In the first instance, an investor’s specific precious metal items (e.g., ten 1 ounce Gold Eagle coins, thirty 10-ounce Johnson Matthey platinum bars, etc.) are held in custody in the account owner’s name and off the balance sheet of the depository company. In a pool arrangement, the investor holds title to a “specific, but undivided interest” in bulk holdings of various types of precious metals assets, which may include a mix of futures and options contracts, as well as physical bullion, that are owned by a larger group of individuals, of which he or she is but one. Note that “pool holdings” are held on the balance sheet of the company operating the pool. In either case, an investor may sell or take delivery of this assets at any time, though a charge will be imposed in the second scenario to convert an investor’s portion of bulk (i.e., pool) holdings into a deliverable form of precious metal.

These two custody arrangements are roughly analogous to investors owning either individual stocks or shares of a mutual fund.

Advantages: A reputable custody program, such as that administered by Diamond State Depository, provides greater flexibility, security and convenience. Your holdings are held in custody on an insured basis while in the depository, and you maintain a personal custody account where your metals are held off the balance sheet of the depository. Your bullion is stored in a high security facility. Also, you will receive detailed transaction confirmations and periodic account statements for your account, thereby keeping you fully apprised of your account status at all times.

Disadvantages: There is generally a nominal cost to hold your precious metals in safekeeping at a precious metals depository. (Note: this is also true if an investor chooses to hold his/her precious metals in a bank safe deposit box.)

Advantages: You may derive a feeling of enhanced personal security and satisfaction from having your precious metals investments immediately within reach.

Disadvantages: When you personally hold precious metals, you may have difficulty finding a secure place to store it. Also, prudence would dictate that you insure your metal against theft or loss, which may prove difficult and expensive. Despite common thinking to the contrary, the contents of a safe deposit box is not insured by the banks that rent them.)

You also may experience delays in selling your metal. If your precious metal is in your possession, and you wish to sell a portion or all of your holdings, you must deliver it to your dealer, typically either in person or by mailing it to the dealer’s facility. The price you are quoted for your sale will be the current market price, which may have fallen since the time you decided to sell. In certain cases, your metal may be subject to an assay, or authenticity test, which may entail more delays and additional costs.

When a precious metal is processed from raw ore and produced in a more refined form, the refiner can process it to varying degrees of pureness for different purposes. The percentage of the metal’s purity – its pure gold content, for example -- is referred to as its "fineness," which indicates the proportion of pure precious metal actually contained in the refined product. In gold refining, for example, the highest fineness for investment grade bullion products is .9999 fine, or 99.99% purity. For example, a one-ounce American Eagle gold bullion coin actually weighs 1.0909 troy ounces, but since it is only 91.67% pure, it contains exactly one ounce of pure gold. The one-ounce Canadian Maple Leaf gold bullion coin, on the other hand, is 99.99% pure (also referred to as “four nines fine”), and since it contains one ounce of pure gold, its total weight is also one troy ounce.