A precious metal is a term for chemical elements belonging to the metal group which, in their natural forms, are rare. The commonly accepted unit of weight for metals is the Troy ounce.
The most common precious metals are gold and silver. Other precious metals are from the platinum group, which includes platinum, ruthenium, rhodium, palladium, osmium, and iridium explains IronFX.
Precious metals have lower chemical activity levels relative to other elements (other than noble gases). They have a brilliant appearance, they’re soft, and they can be shaped. In the past, precious metals were used for trade currency coins, but in the age of modern economics are used mainly for investment or for other industrial uses.
The most well-known precious metals are silver and gold. Although they are used as industrial materials as well, their main use is for coin minting, the manufacture of jewelry and various objects made of rhenium, one of the rarest elements, as well as precious metals from the platinum group: platinum, palladium, osmium, iridium, ruthenium, and rhodium, are used mainly for industrial purposes.
The price of precious metals is determined by both their demand for industrial purposes and by the demand for them as investments, as products that retain their value over time without deteriorating and without requiring maintenance, explains IronFX.
The value of precious metals is influenced mainly by their rarity, but also by the difficulty in obtaining them. Thus, for example, aluminum, the most common metal found on the earth’s crust, was most difficult to produce an extract from mining ores, and in the19th century its value was the same as that of gold.
The demand for metals such as gold and silver for investment purposes rises mainly in an inflation economy as a means of safeguarding the value of money, or during recessions and economic slow-down, as a psychological insurance against hard times.
The Bullion is a form of precious metal used for trade or investment, states IronFX. The Bullion can be found as ingots or coins. The cash value of the Bullion is determined by its weight and the degree of purity of the metal from which it is made, and not by the value which appears on it.
Many countries tend to mint Bullion coins which hold a cash value which is stamped upon them, but their market value is sometimes much higher since the precious metal content is significantly higher than the stamped value. They garner value as collector’s items, adding to their price.
The highest degree of purity in a Bullion is that of the Canadian Gold Maple Leaf coin, which contains 99.999% gold. In contrast, the most famous Bullion, that of the South African Krugerrand, contains 22 karat gold, which is equal to only 91.667% purity, explains IronFX.
The most exchangeable Bullion coin is the Australian Gold Ingot, which weighs one kg and is 99.99% pure. Several countries have minted limited edition gold Bullion coins weighing more, but they are not exchangeable, as they are inconvenient for routine use in investments and trade, IronFX has discovered.