Gold and silver have been recognized as valuable metals and were highly coveted by ancient civilizations. Precious metals still have their place in a savvy investor's portfolio in modern times. But which precious metal is best for investment purposes? And more importantly, why are they so volatile?

There are many ways to buy precious metals like gold, silver, platinum, and a host of good reasons why you should give in to the treasure hunt. So if you're just getting started out in precious metals, read on to learn more about how they work and how you can invest in them.

Gold

We'll start with the granddaddy of them all. Gold is unique for its durability (it doesn't rust or corrode), malleability, and ability to conduct both heat and electricity. It has some industrial applications in dentistry and electronics, but we know it principally as a base for jewelry and as a form of currency.

Its value is determined by the market 24 hours a day, seven days a week. Gold trades predominantly as a function of sentiment—its price is less affected by the laws of supply and demand. This is because the new mine supply is vastly outweighed by the sheer size of above-ground, hoarded gold. To put it simply, when hoarders feel like selling, the price drops. When they want to buy, a new supply is quickly absorbed and gold prices are driven higher.

• Systemic financial concerns. When banks and money are perceived as unstable and/or political stability is questionable, gold has often been sought out as a safe store of value.
• Inflation. When real rates of return (RoR) in the equity, bond, or real estate markets are negative, people regularly flock to gold as an asset that will maintain its value.
• War or political crises. Conflict and political upheaval have always sent people into a gold-hoarding mode. An entire lifetime's worth of savings can be made portable and stored until it needs to be traded for foodstuffs, shelter, or safe passage to a less dangerous destination.

Silver

Unlike gold, the price of silver swings between its perceived role as a store of value and its role as an industrial metal. For this reason, price fluctuations in this market are more volatile than in the market for gold.

While silver roughly trades in line with gold as an item to be hoarded, the industrial supply/demand equation for the metal exerts an equally strong influence on its price. That equation has always fluctuated with new innovations, including:

• Silver's once predominant role in the photography industry (silver-based photographic film) has been eclipsed by the advent of the digital camera.
• The rise of a vast middle class in the emerging market economies of the East created an explosive demand for electrical appliances, medical products, and other industrial items that require silver inputs. From bearings to electrical connections, silver's properties made it a desired commodity.
• The use of silver in batteries, superconductor applications, and microcircuit markets. It's unclear whether, or to what extent, these developments will affect overall non-investment demand for silver. One fact remains: Silver's price is affected by its applications and is not just used in the fashion world or as a store of value

Platinum

Like gold and silver, platinum trades around the clock on global commodities markets. It often tends to fetch a higher price (per troy ounce) than gold during routine periods of market and political stability simply because it's much rarer. Far less of the metal is actually pulled from the ground annually.

• Like silver, platinum is considered an industrial metal. The greatest demand for platinum comes from automotive catalysts, which are used to reduce the harmfulness of emissions. After this, jewelry accounts for the majority of demand. Petroleum and chemical refining catalysts and the computer industry use up the rest.
• Platinum prices are influenced heavily by the geopolitical conditions in the countries where mining takes place as well as the supply and demand equation. In this respect, prices have been determined, in large part, by auto sales and production numbers. The drop in vehicle production and curtailed demand for autocatalysts (which accounts for a third of platinum demand) during the COVID-19 pandemic pushed prices down.5 Supplies dropped by 5% and demand increased by 21% during the first quarter of 2021 (primarily driven by the automotive industry), which could lead to an upward tick in the metal's price.

World Platinum Investment Council. "PLATINUM QUARTERLY Q4 2021 9th March 2022."

Demand in 2022 also increased, but by a marginal 2%.7 Keep in mind, though, that the rise in no-emission vehicles could put pressure on prices

• Platinum mines are heavily concentrated in only two countries: South Africa and Russia.9 This creates greater potential for cartel-like action that would support or even artificially raise platinum prices.