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Buying Precious Metals - Gold & Silver -
for profit?
Gold and silver are two precious metals, sometimes
referred to both as commodities, and as money.
A precious metal is a rare, naturally occurring
metallic chemical element of high economic value, which is not
radioactive (excluding natural polonium, radium, actinium and
protactinium). Chemically, the precious metals are less reactive
than most elements, have high lustre, are softer or more ductile,
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 palladium each have an ISO 4217 currency code.
The best-known precious metals are gold and silver. While both have
industrial uses, they are better known for their uses in art,
jewellery 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. During the
last decades, the use of platinum, palladium and ruthenium as
chemical catalysts has steadily risen.
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.
Historically, precious metals have commanded much higher prices than
common industrial metals. In January 2010, gold was about
$840.00/troy ounce and silver was about $11.00/troy
 ounce,
compared to copper at $0.11/troy ounce and nickel at $0.36/troy
ounce.
In the early part of the 21st century, precious metal prices rose
significantly and recycling precious metals became more and more
attractive. Some companies have been doing recycling for many years,
such as Sabin Metal Corporation (since 1945).
A metal is deemed to be precious if it is rare. The
discovery of new sources of ore or improvements in mining or
refining processes may cause the value of a precious metal to
diminish. The status of a "precious" metal can also be determined by
high demand or market value. 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. Although nominally
issued as legal tender, these coins' face value as currency is far
below that of their value as bullion. For instance, Canada mints a
gold bullion coin (the Gold Maple Leaf) at a face value of $50
containing one troy ounce (31.1035 g) of gold—as of July 2010, this
coin is worth about $930 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 issue to issue. 99.9%
purity is common. The purest mass-produced bullion coins are in the
Canadian Gold Maple Leaf series, which go up to 99.999% purity. Note
that a 100% pure bullion is not possible, as absolute purity in
extracted and refined metals can only be asymptotically approached.
Many bullion coins contain a stated quantity (such as one troy
ounce) of the marginally-impure alloy. In contrast, the Krugerrand
is one of many historic and modern bullion coins of 22 Kt Crown
gold, with a stated content (usually one troy ounce) of "fine gold",
with the other component(s) of the alloy making the coin heavier
than one ounce in total. Still more bullion coins (for example:
British Sovereign) state neither the purity nor the fine-gold weight
on the coin, but are recognized and consistent in their composition,
and many historically stated a denomination in currency, such as the
American Double Eagle.
One of the largest bullion coins in the world is the
10,000 dollar Australian Gold Nugget coin minted in Australia which
consists of a full kilogram of 99.9% pure gold. There have been a
small number of larger bullion coins, but they are impractical to
handle and not produced in mass quantities.
China has produced coins in very limited quantities
(less than 20 pieces minted) that exceed 260 troy ounces (8 kg) of
gold.
Austria has minted a coin containing 31 kg of gold
(the Vienna Philharmonic Coin minted in 2004 with a face value of
100,000 euro). As a stunt to publicise the 99.999% pure one-ounce
Canadian Gold Maple Leaf series, in 2007 the Royal Canadian Mint
made a 100 kg 99.999% gold coin, with a face value of $ 1 million,
and now manufactures them to order, but at a substantial premium
over the market value of the gold.
Gold and silver are often seen as hedges against both inflation,
deflation and economic crisis. Silver coins have become popular with
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.
PLEASE SEEK
PROFESSIONAL ADVICE BEFORE YOU BUY OR SELL GOLD, SILVER & COINS.
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