Understanding Precious Metals

Precious metals such as gold and silver have always been used to pay products and products directly and indirectly. They are standardized and traded by both hedgers and speculators worldwide. Hedgers use metal contracts to protect inventories while speculators trade contracts to take advantage of market inefficiencies.

The higher relative values of these metals are driven by various factors including their rarity, uses in industrial processes and use as an investment commodity.

All contracts specify metal weights in troy ounces. A troy ounce weights 31.10 grams.

Precious metals include, but are not limted to: gold, silver, platinum, iridium, rhodium and palladium.

Gold is the most important precious metal. It is denser than cheaper metals, resistant to erosion and has a beautiful golden color. The two most significant applications of gold are jewelry making and coins/bullion.

Silver is more widely available than gold thus is cheaper. It is a shiny white metal and a better conductor of electricity than copper. However, silver is prone to tarnish in air. Thus makes silver less desirable for bullion than gold.

Investopedia explains Precious Metals

Investing in precious metals can be done either by purchasing the physical asset, or by purchasing futures contracts for the particular metal. Another way to gain investment exposure to precious metals is to purchase shares in publicly traded companies that deal in the exploration or production of precious metals, such as a gold mining company.