A precious metal is a rare, naturally occurring metallic chemical element of high economic value.Chemically, the precious metals tend to be less reactive than most elements. They are usually ductile and have a high lustre. 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 the coinage metals, 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.
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.
GOLD
Of all the precious metals gold is the most popular as an investment.[ll Investors generally buy gold as a way of diversifying risk. The gold market is subject to speculation as are other markets, especially through the use of futures contracts and derivatives. Gold price has shown a long term correlation with the price
of crude oil. This suggests a reason why gold is sold off during economic weakness.
However, during the recent period of recovery following the worldwide economic recession of 2008, Gold has also been used as an instrument to prevent losses or incur profits. [3] A recent example was UK investment asset management firm Algorates’ shorting of Gold just prior to the 2013 downturn in Gold prices.
Gold has been used throughout history as money and has been a relative standard for currency equivalents specific to economic regions or countries, until recent times. Many European countries implemented gold standards in the latter part of the 19th century until these were temporarily suspended in the financial crises involving World War I After World War II, the Bretton Woods system pegged the United States dollar to gold at a rate of US$35 per troy ounce. The system existed until the 1971 Nixon Shock when the US unilaterally suspended the direct convertibility of the United States dollar to gold and made the transition to a fiat currency system. The last currency to be divorced from gold was the Swiss
France in 2000.
Since 1919 the most common benchmark for the price of gold has been the London qold fixinq, a twice- daily telephone meeting of representatives from five bullion-trading firms of the London bullion market. Furthermore gold is traded continuously throughout the world based on the intra-day spot price, derived from over-the-counter gold-trading markets around the world (code ‘XAUI). The following table sets forth the gold price versus various assets and key statistics on the basis of data taken with the frequency of five years.