Metals are used in all areas of industry and construction, from the building of houses and factories to the fabrication of machines, electronics and consumer goods. Some metals also have value either as components of jewellery, or as repositories of value in their own right. Consequently the trade in metal commodities of all types is both busy and lucrative. Metal commodities may be split into two types: precious metals and industrial metals.
Gold is the primary precious metal traded as a commodity. It has a large number of uses: not only is it used in jewellery, but it has an increasing number of industrial applications, especially in electronics. Gold also has a role as a refuge for currency speculators: when currencies are under pressure due to poor economic conditions, gold can act as an alternative currency. In such conditions, gold tends to appreciate in value; in addition, it is not a promissory note (as with currency), but a real commodity with actual, not notional, value. This makes it very attractive for traders that wish to preserve their financial resources until economic conditions improve and other investments become more attractive. Another precious metal traded on the world commodity market is silver. It has many of the same uses and attributes of gold, except perhaps it is less useful in industrial applications, and historically it has not been used as a reserve currency in the same way as gold. However, in the present economic climate some traders are beginning to invest in silver as an alternative to gold, with the price of the latter being at a record high, and likely to go up further. Amongst other precious metals traded on the commodity market, platinum and palladium are notable. Platinum has a long history as a precious metal with industrial uses, while palladium is part of the same group of metals as platinum and has many similar properties. Gold as a commodity and the other precious metals covered above are traded on many exchanges around the world, but the primary centres of trade are the London Bullion Market, the New York Mercantile Exchange (NYMEX) and the Tokyo Commodity Exchange (TOCOM). The unit of trade is the troy ounce.
There are many metals used in industrial processes that are traded as commodities. Some, like copper, lead and tin, are metals that have been used for centuries, and traded as commodities (or at least, traded in ways analogous to modern commodity trading) for a similar length of time. Other industrial metal commodities, like zinc, aluminium, steel, nickel and molybdenum, are newer but key to many modern industrial processes. Such processes are also leading to new commodities being brought onto the market: scrap or recycled steel is a recent addition. Though these industrial metals are traded in commodity exchanges around the world, the primary centre for most of them is the London Metal Exchange (LME). The New York Mercantile Exchange is also significant, as is the Hedge Street Exchange in California and the Central Japan Commodity Exchange (C-COM). Industrial metals are traded in metric tons.
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