The commodity markets exist because there is enough demand for particular goods that there is a need for traders to easily buy or sell them. Supply and demand stems from an economic expansion or contraction in most cases, while other commodities are influenced by trader activity.

Gold and silver stand apart in the commodities world as assets that trade primarily for reasons other than industrial (silver does have many industrial uses but its price is affected by many other reasons) or agricultural ones. Trading activity occurs from speculation, as well as wealth preservation. These precious metals are common safe-haven purchases during times of economic uncertainty or high market volatility, and tend to trade more on investor behavior patterns than economic fundamentals.

Gold and silver do have some industrial value that accounts for part of their actual cost. As a good conductor of electricity, gold is commonly used in microchip manufacturing and various facets of the tech industry. Silver, on the other hand, has even more value in the semiconductor industry, while also being invaluable in medicine, photovoltaic energy, batteries and numerous other applications.

However, despite the practical application of these metals, investors don’t usually trade them based on economic speculation. They have value as safe-haven assets, in that they will retain their value, or even appreciate in price during times of economic turbulence. Think of it as the Wall Street equivalent of sticking money in your mattress to avoid certain risks.

The U.S. dollar is the global standard for currencies, but it’s still susceptible to risks like inflation and central bank decisions. Gold, on the other hand, is far more secure as a physical commodity that has a set value determined by a global standard. Gold and silver investors don’t need to worry about foreign currency exchange risks or Treasury yields when inflation rises above the 10-year yield.

When the stock market is experiencing volatility, gold and silver provide some stability for investor portfolios, making them valuable during these times. Unlike stocks, the precious metals will always have some amount of set value; they will never drop to zero, unlike companies that could go bankrupt.

They also tend to trade together, with silver trailing behind gold’s movement. When gold begins to rise, silver will follow later, and vice versa. While both are considered safe-haven assets, gold is also used as an inflation hedge, while silver’s industrial use gives them some diversification as well.

Investing in gold or silver as a means to mitigate risk can be an effective strategy, but not a fool-proof one. Gold’s value as a safe-haven asset is second to its value as an inflationary hedge. When inflation is less than the risk-free rate, typically cited as the yield on the 10-year Treasury, investors don’t need to protect themselves from inflation through gold. Even a safe-haven asset comes with some risk, and investors should be wary of other factors at play before making any purchases.