The Precious Metal Trade

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Gold, silver, palladium, and platinum are
the forerunners of the highly regarded precious metal trades. Gold trading
companies all over the world trade with these precious metals in various ways.
From buying hem from the mining corporations to buying precious metals from
individual owners in the form of scrap gold from electronic equipment, gold
jewelry (used and new),bullion from stock investment companies and a variety of
other sources.

 

These gold
buyers purchase gold based on spot prices

that are determined mostly by the London Gold Bullion Market that sets the
price of precious metals such as gold, silver, palladium and platinum twice
daily via telephone conference call. The five entities that are involved are
the major gold trading companies in the
London bullion market.

 

The precious metal trading, although
considered commodities actually do not behave much like most other commodities
such as zinc, copper, aluminum, wheat, barley, cocoa, sugar and palm oil. This
is due to the fact that these commodities that are not within the category of
the precious metal lists are devoid of store value, meaning they do not posses
a certain retain value in accordance to the purchasing power that it has. The
prices are mostly determined by supply and demand.

 

As for precious metals the market reacts
to market sentiment more than it does towards the supply. The value of precious
metals rarely run away far from the intrinsic value they possess. To
demonstrate this fact in a simple manner all one has to do is gauge the price
of a barrel of crude oil 50 years ago and the price of a barrel of crude oil
today.

 

Although the price in accordance to paper
currency has a huge difference (The price of
crude oil per barrel 50 years ago was within the region of 400 dollars as compared to the price
today which is close to 1000 dollars). If the quantity of gold was taken into
consideration (or any other precious metals for that matter) the same amount
(if not less) of gold would be required to purchase a barrel of crude oil then
and now.

 

This fact is the primary reason why
precious metals are sought after during bad economic times. The demand for gold
increases during the downfall of any economy due to the fact no matter what
happens precious metals will retain their value with regards to purchasing
power.

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