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Precious
metal
Item # 5803
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A precious metal
is a rare metallic chemical element of high, durable
economic value.
Chemically, the precious metals are less reactive
than most elements, have high luster, and have higher
melting points than other metals. Historically, precious
metals were important as currency, but are now regarded
mainly as investment and industrial commodities. Gold,
silver,
platinum
and palladiumare still though internationally recognised
as forms of currency under ISO 4217.
The best-known precious metals are gold
and silver.
While both have industrial uses, they are better known
for their uses in art, jewelry,
and coinage. Other precious metals include the Platinum
group metals: ruthenium, rhodium, palladium, osmium,
iridium, and platinum, of which platinum is the most
widely traded. Plutonium and uranium could also be
considered precious metals.
The demand for precious metals is driven not only
by their practical use, but also by their role as
investments and a store of value. Palladium is, as
of February 08 2006, valued ($289 USD per ounce) at
a little under half the price of gold ($549 USD/ounce),
and platinum ($1,045 USD/ounce) at about twice that
of gold. Silver is substantially less expensive ($9.43
USD/ounce) than these metals, presently at 1/58 the
price of gold, but is often traditionally considered
a precious metal for its role in coinage and jewelry.
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Item # 6146
Precious metals in bulk form are known as bullion,
and are traded on commodity markets. Bullion metals may be cast
into ingots, or minted into coins. The defining attribute of bullion
is that it is valued by its mass and purity rather than by a face
value as money.
Many nations mint bullion coins, of which the most famous
is probably the gold
South African Krugerrand. Although nominally issued as legal tender,
these coins' face value as currency is far below that of their value
as bullion. For instance, the United States mints a gold coin (the
Gold Eagle) at a face value of $50 containing 1 troy ounce (31.1035
g) of gold — as of January 2006, this coin is worth about
$550 as bullion. Bullion coins' minting by national governments
gives them some numismatic value in addition to their bullion value,
as well as certifying their purity. The level of purity varies from
country to country, with some bullion coins of as pure as 99.99%
available (the Canadian Gold Maple Leaf coin meets this standard).
Note that a 100% pure bullion is not possible, as absolute purity
in extracted and refined metals can only be asymptotically approached.
One of the largest bullion coins in the world is a 10,000 dollar
coin minted in Australia which consists of a full kilogram of 0.999
pure gold; however China has produced coins in very limited quantities
(less than 20 pieces minted) that exceed 260 troy ounces (8 kg)
of gold.
Gold as an investment is often seen as a hedge against both inflation
and economic downturn. Gold in particular has retained its value
well over long periods of time. Meanwhile, silver
bullion coins have become popular with coin collectors due to their
relative affordability, and unlike most gold and platinum issues
which are valued based upon the markets, silver issues are more
often valued as collectables, far higher than their actual bullion
value.
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Precious
metal status
Item # 6407
A given metal is precious
if it is rare. If mining or refining processes improve, or new supplies
are discovered and exploited, the value of such a metal declines.
An interesting case of a precious metal going common is that of
aluminium. Aluminium was, when it was first discovered, extremely
difficult to separate from the ore it was part of and, since the
whole of the Earth's aluminium was bound up in the form of compounds,
the most difficult metal on earth to get, despite the fact that
it is one of the planet's most common.
For a while, aluminium was more valuable than gold;
bars of aluminium were exhibited alongside the French crown jewels
at the Exposition Universelle (1855). However, the price dropped
continually and collapsed altogether when an easy extraction method,
the Hall-Héroult process, was discovered in 1886.
The rarity of various metals may again be in for a shift, however.
According to USGS statistics, at current production rates all the
gold in the earth's crust
will theoretically be processed within several decades. Meanwhile,
silver is in a structural supply deficit, with 300 million troy
ounces (9,000,000 kg) more being consumed each year than is mined--it
may currently be more rare than gold .
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