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    COMMODITY MARKETS

    Precious Metal

    COMMODITY MARKET PRECIOUS METALS

    Gold

    Gold, as one of the most commonly appreciated precious metals, has been historically utilised as a medium of exchange for millennia. Its appeal goes beyond the era of the ancient pyramid building Egyptians who valued it as an ornamental metal and a symbol for power and riches. The physical traits of gold included its malleability, that is, its being easily shaped into various forms to produce jewellery and, consequently, led to its use as among the first coins ever used. The use of gold as currency continued up to the end of the Bretton Woods agreement in the early nineteen seventies when the UK dollar was attached to the price of gold to ensure that the central banks could not print money at will without the corresponding weight in gold. This led to the devalued buying ability of money. The limited supply of gold on the planet in contrast to the continually increasing amounts of currencies arising from monetary stimulus is one of the primary causes why gold remains to have financial appeal up to the present time.

    As a vital risk control tool, gold is commonly used to aid in building a strong base for a diverse portfolio. Whereas banks no longer attach their currencies to the value of gold, they continue to hold about 5 to 10% of their overseas gold currency reserves. This is an accepted strategy amongst investors to reduce overall risk and enhance the long term revenues for both retail investors and banks equitably. The diversity that gold can provide to a portfolio is summarised in a quotation attributed to Alan Greenspan, to wit: "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation." When the markets spiral beyond control or when lopsided inflation arises, investors usually depend on gold to safeguard their investments from risk.

    In the present economic environment and with gold bullion gaining strength through regeneration, many viable asset types still react advantageously to many of the predominant economic forces at work today. With a commodity that does not only minimise risk in a portfolio but also enhances long term revenues, we can see why the global demand for gold remains high and continues to increase with time. Nevertheless, gold experiences seasonal demand, such that the periods during such cultural events as Christmas, Indian weddings, and Diwali offer stable lengthy trends which should be taken into consideration.

    PGM (Platinum Group Metals)

    The PGM metals we offer include platinum and palladium. Surprisingly to most people, not only jewellers and investors buy PGM's. In truth, much of the demand comes from the car manufacturing industry which uses both metals to produce essential components in catalytic converters. Catalytic converters transform toxic exhaust fumes into nontoxic substances and with the present trend toward protecting the environment, this situation will not likely to take a drastic change into the near future.

    Starting in 2001, the car industry posted 72% of all global palladium demand. Since then, there have been issues with supply from the biggest producer (Russia) and, as a result, prices shot up from $450 to $1100 within a period of one year. The largely competitive car industry then had a reason to shift from palladium to platinum to maintain low production costs. Shortly after this shift to cheaper platinum, the prices of palladium tumbled to less than $200 per ounce.

    Due to political tensions or other related events that may constrict supplies coming from Russia, people anticipate that the same occurrence could produce drastic movements in palladium prices. Platinum prices have increased to 200% in recent years and some market analysts claim that these higher prices may induce the automotive manufacturers to return to the use of palladium.

    Despite being used as an industrial metal, PGM's are undoubtedly still labelled as precious metal. Investors can acquire them as a wealth storage and as leverage against the same financial risks which gold and silver shelter against. This diversification and the emission restrictions imposed upon countries by virtue of the Kyoto agreement behooves investors to choose platinum, palladium or both metals as part of a diversified portfolio on metals.

    PRECIOUS METALS

    Silver

    Silver is both classed as precious metal and as industrial metal. It is also a less expensive and less volatile alternative to gold. Both gold and silver arise from similar fundamentals. For instance, higher inflation, slumping US dollar values and volatile markets will build a demand for silver. Silver investing has become a more preferable choice today compared to gold, mainly because of the variance of price comparison also referred to as the gold silver ratio. These ratios are monitored regularly and any unusual movements of the pair with respect to one another usually cause more silver purchases because majority of investors believe that the gold silver ratio will tend to stabilise eventually to the "normal" level.

    The use of silver in photography has begun to go down in recent years as the shift from analogue to digital photography becomes complete. Ironically, while the use of silver in photography has decreased, the use of silver in electronic devices will surely increase in the production of more digital cameras.

    As stated earlier, the silver demand shifts seasonally. In particular, the change is noticeable during the Christmas Season in the West where the jewellery market has natural affinity to silver than gold. In India where the traditional dowry for newly married couples was predominantly gold, more and more silver jewellery purchases are seen during the India wedding season. This pattern is predicted to grow even more in the future.

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