4 Precious Metals Most Comparable to These Stock Market Asset Classes
Many readers had likely seen the well-known 2013 film, “The Wolf of Wall Street,” with its portrayal of stock-market excess and the idea that more is never enough. Against that backdrop, Atlanta Gold & Coin considered it an interesting exercise to compare the four most popular precious metals with different stock-market investment styles and categories.
The original article also went a step further by using several individual stocks as illustrations, providing additional perspective. It was not intended to recommend particular precious metals instead of those stocks. Rather, the comparison was meant to help people who were new to precious metals understand how gold, silver, platinum, and palladium traded and which factors could influence their values.
The point of the exercise was that different precious metals did not react in the same way across different economic conditions.
When this article was originally published, Atlanta Gold & Coin considered the discussion timely because the coin and bullion market was seeing many new investors trying to navigate and do well in a high-inflation environment. The original article also noted that a large investor had recently drawn headlines after retaining the services of a well-known coin and bullion dealer to fill a $50 million order.
The reported rumor at publication was that this individual expected this to be the first of several orders over the following 6 – 12 months.
Returning to the main subject, Atlanta Gold & Coin’s purpose was to provide details about each precious metal covered here. The information was intended to encourage interest among readers who were unfamiliar with precious metals or who were considering their first step into the field.
With that introduction complete, the article began with gold, the best-known and most widely recognized of these four precious metals.
THE METAL: Gold
Gold is, in a sense, the gold standard among precious metals. It has served as money for thousands of years. The article further stated that the Constitution permitted only gold and silver specie, meaning coined money or coin, as currency.
The United States remained on the gold standard until 1971. The article argued that, while that standard was in place, the country experienced lower inflation, fewer and shorter recessions, less severe downturns, and broader economic prosperity. It then contrasted this with the period after the dollar’s connection to gold was ended in 1971, associating it with record debt, deficits, inflation, and money creation.
According to the article, one of gold’s central characteristics was its ability to limit governments’ spending beyond their means and require discipline and restraint. When an entity must work within a balanced budget, it has to identify what matters most and set priorities accordingly.
How had gold performed through the years? When this article was published, it stated that gold retained as much value in the United States as it had in the 1800’s. Put another way, a $20 gold coin in the 1800s was described as having the same purchasing power at publication as it had then.
At the time of publication, its melt value was approximately $1,600, and the article said that amount could buy the same quality men’s suit and shoes it could 150 years earlier. By comparison, if someone had chosen the convenience of a $20 bill rather than a $20 gold coin, the article said it did not retain equivalent spending power. At publication, it suggested that $20 might not even buy a belt.
Although the article described gold as maintaining purchasing power over time and functioning as a means of preserving wealth, it called gold the least exciting of the four metals discussed. Some people might characterize it as a staid, unexciting investment. Still, the article noted that an investment portfolio also needs staid or boring types of stocks.
Many advisers, the article explained, recommend keeping a core group of dependable, or “stodgy,” stocks that pay dividends and bring stability to an otherwise uncertain market.
THE STOCK COMPARISON
Atlanta Gold & Coin viewed gold as the most consistent metal and the closest match for large, dividend-paying value stocks.
One example offered was AT&T.
The article characterized it as a large bellwether stock that had endured over time and had probably served as a core holding in many investors’ portfolios.
At the time this article was written, AT&T was described as one of the highest dividend-paying stocks in the S&P 500.
THE METAL: Silver
At publication,
Mark Skousen was quoted as saying, “Gold and silver have always had value, never have gone to zero. Can you say the same for stocks and bonds?” Silver has functioned as money or currency for at least as long as gold, and possibly longer. The original article added that, as recently as 1964, U.S. dimes, quarters and half dollars were composed of 90% silver.
History contains many references to silver being used as money. The article had already addressed silver’s inclusion in the Constitution, and it also pointed to many biblical references to the metal. Depending on the source consulted, silver was said to appear in the Bible as many as 300 times, perhaps more. Specific examples had been highlighted in a previous article. In short, people have clearly valued this precious metal as currency for barter and trade for thousands of years.
The gold-to-silver ratio has changed over time, but the U.S. government first formally set it at 15 to 1 after passage of the Coinage Act of 1792. Its original purpose was to establish how much silver was needed to buy one ounce of gold.
When this article was originally published, gold and silver no longer had a fixed exchange ratio; market forces set their prices instead. At the time of writing, the ratio stood at 84 to 1, above the historical average. Although silver was estimated to be 19 times more abundant than gold, annual mining produced only about 8 times as much silver. For that reason, many investors believed the gold-to-silver ratio would narrow over time, raising silver prices.
Gold generally tends to do well in both inflationary and deflationary settings, while silver has tended to perform most strongly during periods of high inflation. It can also respond favorably to a weakening dollar even where consumer-price inflation is minimal or absent.
Looking back at periods when silver performed especially well, including 1980 and 2011, the article noted high monetary or price inflation. In 1980 and 2011, the gold-to-silver ratios were 16 to 1 and 31 to 1, respectively—substantially below the ratio reported at publication.
A common view was that someone expecting gold to rise should choose silver, because silver often outperformed gold in a bull market. Some described it as a “slingshot effect.” It could rise by a much larger percentage. The opposite could occur as well: when gold declined, silver often fell by a greater percentage.
THE STOCK COMPARISON
The article compared silver with a solid technology company, such as Apple.
It was presented as a dependable company that could at times outperform competitors while appearing to have limited downside risk. Put differently, the author did not believe Apple’s stock price would collapse and cause the company to enter bankruptcy in the near future.
At publication, the article anticipated strong advances in silver prices, particularly given the economic conditions then. It also acknowledged that prices might retreat in a declining market, which readers were asked to keep in mind when determining an appropriate allocation.
Even so, the article considered silver an asset class that merited a place in a portfolio. It suggested viewing silver as a large growth stock.
THE METAL: Platinum
Platinum is a compelling precious metal, though it lacks the lengthy history of gold and silver. There are no biblical references to it and no founding documents identifying it as an accepted form of money. One reason is that platinum was not discovered until 1735. Although nearly 300 years seems lengthy, it is brief compared with gold’s and silver’s histories.
In Russia, platinum first served as money during the 1820’s, a point Atlanta Gold & Coin covered in one of its previous articles. Even so, most other countries did not adopt it until modern investment coins were minted. The United States did not begin producing its first platinum coin, the American platinum eagle, until 1997. For much of history, platinum was viewed primarily as an industrial metal instead of an investment metal, though that view had shifted somewhat over the preceding couple of decades.
Common industrial applications for platinum include jewelry, electronics, and catalytic converters. Palladium has likewise been used in similar ways, as the next section would explain. Platinum, however, has been especially popular in jewelry production. Until relatively recently, the public generally considered it more valuable and desirable than gold, because platinum has historically carried a higher value than gold. Its record high of $2,270 exceeded gold’s record high of $2,075! The metals changed places a few years before publication, and gold had consistently traded above platinum since then. At the time of publication, that remained so even though platinum was 30 times rarer than gold and only a small number of platinum mines existed worldwide.
THE STOCK COMPARISON
Because platinum is used mainly in industry, its price generally follows a more cyclical pattern. Put simply, platinum prices often move with the broader economy.
From a stock-market standpoint, one useful example is Delta.
Delta is a cyclical stock, meaning it experiences both stronger and weaker periods. When the economy struggles and consumers have less discretionary income, fewer people tend to travel. Travel can also decline as ticket costs rise because of higher oil prices, labor expenses, and similar pressures. For someone expecting economic growth rather than contraction, the original article presented platinum as a probable choice.
THE METAL: Palladium
Palladium shares many characteristics with platinum and is considered part of the platinum-metal family. It was discovered soon after platinum in 1803 and, since then, has been used primarily as an industrial metal.
Until relatively recently, many investors paid little attention to palladium. Historically, its price traded at about one-half of platinum’s price.
At the time this article was written, palladium was the most valuable of the four precious metals discussed here. Although its price had declined considerably from the March 2022 high of $3,440, it remained above $2,100 and had consistently exceeded gold’s price since about December of 2018. That change drew attention to palladium and increased its popularity as an investment metal.
The original article attributed the March 2022 price surge primarily to the Russia-Ukraine war and sanctions on Russia, which was identified as one of the world’s largest palladium producers.
The first palladium coins were issued by Sierra Leone and Tonga in 1966 and 1967. Russia—then the Soviet Union—was among the next countries to make palladium coins. Other issuers soon followed, including Canada, Australia, the Isle of Man, China, and eventually the United States in 2017.
Since its inaugural year, the U.S. Mint has made only a limited number of palladium coins, with fewer than 100,000 coins minted through 2022.
As noted earlier, palladium has historically served industrial purposes, and the original article said that remained true at publication. Like platinum, it is used in jewelry, dental applications, catalytic converters, and electronics. Its scarcity and wider industrial use have, in part, supported persistently higher prices. Palladium is among Earth’s rarest metals and is 15 more times rare than platinum.
For perspective, only a little more than 6,000 tons of palladium had been mined, making it 230 times rarer than silver and 30 times rarer than gold.
THE STOCK COMPARISON
Because palladium displays many of platinum’s traits, the article treated it as partly comparable to a cyclical stock, while also seeing similarities to a fast-moving speculative technology stock.
The article used Tesla as its example.
When the economy performs well and the government subsidizes electric vehicles, Tesla stock can rise sharply. It is also highly volatile and can face abrupt, severe declines. At the time of publication, Tesla traded at nearly 50% of its all-time high, while the market was described as barely in bear-market territory.
The original article said that continued economic weakness, including tight Federal Reserve monetary policy, could lead to an additional decline in Tesla’s stock price.
By the same reasoning, the article expected palladium’s price to decline in an economic downturn unless inflation became significantly and persistently high or the dollar weakened substantially.
Summary
The purpose of this article was to provide additional context on the four most popular precious metals and use stock-market comparisons to help newer investors connect metals with an area they might know better.
The discussion opened with gold, described as the most popular precious metal. It has enduring relevance and can preserve wealth; while it is not flashy, it has consistently helped investors retain purchasing power over time. The article viewed gold as a core holding, similar to a large value stock that pays dividends. Its stock example was AT&T.
At publication, Silver was also described as one of the most popular investment metals. Like gold, it has served as money for thousands of years, including in the United States as recently as 1964. This white metal was characterized as flashier and more volatile than gold, yet still appropriate as a core holding. Because of its greater upside potential and partly speculative nature, the article compared it with Apple stock.
Platinum was presented as an appealing industrial and investment metal. Although it was not used as money until much later than gold and silver, its value is recognized throughout the modern world. It is 30 times rarer than gold, one reason it was more valuable than gold until a decade before publication.
Because platinum has extensive industrial use, the article considered it most comparable to a cyclical stock and selected Delta as its stock-market example.
Finally, the article turned to palladium, the rarest of the four precious metals highlighted. Platinum and palladium prices switched positions a few years before publication and had remained in that order since.
After reaching $3,400, palladium was described as having substantial upside potential but also being subject to extreme volatility. For that reason, the article compared it with Tesla, a stock that can create a fortune on its rise but can also disappoint sharply on its decline.
When this article was originally published, readers were invited to contact the precious-metals experts at Atlanta Gold & Coin Buyers if they found the discussion useful.
At publication, Atlanta Gold & Coin Buyers stated that it specialized in all of these precious metals and was one of the leading buyers and sellers of rare and bullion coins in the Southeast.
See why more and more people are choosing Atlanta Gold & Coin as their preferred coin dealer.
Happy treasure hunting!
