Ever wonder why no one talks about copper like they do gold and silver? And why don’t we see coins and jewelry made out of aluminum? The answers to these questions boil down to the differences between base and precious metals.
Base Metals vs. Precious Metals
Base metals are the workhorses of the metal world. These metals include copper, lead, iron, nickel, zinc, and aluminum. Uses for base metals include electrical wiring, galvanized-steel coating, pipes, roofing, food containers, batteries, and regular coins used as currency.
“Base metals are relatively common in the earth’s crust and less expensive and easier to mine than precious metals. However, while the prices of, say, copper and nickel, are lower than silver and gold, base metals play an extremely important role in the world economy due to their many industrial applications,” according to The Assay newsletter’s website.
Meanwhile, precious metals are generally more appealing than base metals to people who are interested in portfolio diversification and security. Precious metals include gold, silver, platinum, palladium, and rhodium.
“Precious metals are precious because they are rare. There is a limited amount of these minerals produced each year, and scarcity is the reason for their [appeal],” according to personal finance website The Balance.
Among the uses for precious metals are jewelry, electronics, medical equipment, automotive parts (such as catalytic converters), and currency. Yet unlike base metals, precious metals—in the form of bars and coins—also are seen as means to store wealth.
The U.S. Bureau of Labor Statistics summarizes the difference this way: “Precious metals tend to be rare, of high economic [significance], and have desirable properties such as corrosion resistance…. Base metals tend to be more abundant, of lower economic [significance] than precious metals, and have other desirable properties for industrial applications.”
How to Buy Base Metals and Precious Metals
Everyday people can buy base metals and precious metals through publicly traded stocks and exchange-traded funds (ETFs). Of course, industrial users can buy actual base metals and precious metals. People also can buy physical forms of precious metals to add to their portfolios; much more than with base metals, holding precious metals is viewed as a way to diversify a portfolio.
Some analysts offer a positive outlook for base metals and precious metals in 2021. The Reuters news service reported in December 2020 that copper, iron, and gold—an “alloy” of base and precious metals, if you will—should benefit this year from an economic recovery.
“Traditional safe-haven gold scaled record highs this year as investors sought refuge from a weakening dollar and a global barrage of government spending that threatened rising inflation. Prices have eased as vaccine hopes spurred investors to redeploy capital, but bullion’s outlook remains upbeat in 2021,” Reuters noted.
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