Introduction
Precious metals are rare, naturally-occurring metallic elements in the Earth’s strata and have high economic value. Precious metal commodities are unusual for a reason; they act as both investments as well as industrial elements. Manufacturers use metal commodities for a variety of products like electronic parts, jewellery, and dental equipment. Investors collect coins and bars made of these metals. The latter use of metals, in precious metals trading, makes investors see these commodities as having better value than paper money.
High-Value Commodity Trading Metals
Commodity trading metals that have high value include –
- Gold
- Silver
- Platinum
- Palladium
Gold is the most essential metal in the precious metals trading industry. Amongst the precious metals, gold stands out for its durability and malleability. Although gold is used in manufacturing electronic parts at times, its primary demand is in the production of jewellery. Many consumers view metal commodities made of gold as a form of investment.
Silver is widely used in the manufacture of both electronic products and jewellery. Among the commodity trading metals, silver traditionally holds a fraction of the value of gold, financially. Price fluctuations of silver are more marked than that of gold.
Platinum belongs to a cluster of metals that are known as the platinum group metals (PGMs) and is used to make catalytic converters for cars, in addition to jewellery. Platinum is inclined to collect a higher price than gold during usual times simply because of its sparse availability. As the automobile industry is heavily reliant on this precious metal commodity, the price for platinum is determined heavily by the production and sales rates of automobiles.
Another member of PGMs is Palladium, which is used in the production of catalytic converters, electronic parts, and dental apparatus.
Contract Sizes
The contract sizes for various precious metals trading are 100 troy ounces for gold, 5,000 troy ounces for silver, 50 troy ounces for platinum and 100 troy ounces for palladium. Precious metals provide one with unique protection from inflation; that is because of their intrinsic value, lack of credit risk, and inflationary immunity. They also guarantee upheaval insurance against financial or political factors.
From the standpoint of investment theory, precious metal commodities have a low or negative correlation to assets of other categories. Hence, acquiring even a small amount of precious metal commodities in our portfolio reduces risk and volatility.
Base Metals
According to the US Customs and Borders Protection, base metals include these commodities, Aluminium, Steel, Copper, Tin, Zinc, Iron and Lead, amongst others. Base metal commodities consist of a whole list of industrial and commercial applications. The widespread use of base metal commodities, in items of everyday use, makes them essential elements of trade in the global market.
Conclusion
Although investing in precious metal commodities offers a high degree of security, there is always a bit of risk involved, as with any other investment. Prices of precious metals trading can drop at times, and selling these assets might also prove to be a challenge during economically volatile times when prices skyrocket. The supply of commodity trading metals can also be an issue when demands hit the roof. A shortage in supply can put a strain on the prices. But, the bottom line remains that precious metal commodities are an excellent means of adding diversity to one’s portfolio. The trick to ace the investment is to know one’s goals and assess the risk profile before diving in.
