Why do precious metals cost more than base metals?

Did you know that there are 118 elements in the periodic table, and around 92 of them are metals. What do you think separates Precious Metals from base metals?

Come, let’s explore the differences between these types of metals today.

As its name suggests, Precious Metals are scarce. Commonly known as Gold, Silver or Platinum these metals are also highly durable and often used in the production of fine jewelry as well as in industrial capacities.

Historically, gold was used as a form of exchange way before the introduction of fiat currency.

In contrast, base metals are cheap, abundant and can be easily sourced. Examples of base metals include copper, lead, nickel, zinc and aluminum. Also, base metals are not corrosion resistant and are easily tarnished. In the US, corroded pennies are a common sight these days.

How to invest in precious metals and base metals?

There are several ways for anyone to invest in Precious Metals such as physical bullion, future contracts or Exchange Traded Funds (ETFs). The most secure way is owning a physical bullion as there are no counterparty risks involved. The owner can directly sell or trade it anywhere in the world.

For base metals, investors can trade its future contracts or through Exchange Traded Funds (ETFs). Both are cost effective, transparent and convenient ways to invest in base metals. You also don’t need to worry about storage. The costs for production (premiums) are also excluded from the ETFs.

Precious Metals (as they are highly liquid) will have thinner spreads as investors are always on the lookout to purchase them for the best price. On the other hand, base metals have a wider spread as they are illiquid when compared to Precious Metals such as Gold or Silver.

A wider bid/ask spread is an indirect cost in trading, especially for huge orders. A wider spread will equate to a higher premium for investors. To minimize volatility, using a limit order is a better option. GSC Live! allows you to place a limit order at your desired price with narrower spreads anytime, anywhere!

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Hopefully, this article has given you a basic understanding of the differences between Precious Metals and base metals. If you are interested in investing, buying or selling Precious Metals, feel free to reach out to us as we carry a wide range of LBMA accredited Gold, Silver and Platinum bullion that can help you diversify your investment portfolio.

Evonne