Precious Metals Market

Precious metals market is an economic sphere of the relations between the parties of the transactions with precious metals, gems quoted in gold.

As a systemic phenomenon, precious metals market can be viewed from two points: functional and institutional.

From functional point of view, precious metals and gems market is a trade and financial center, where the trading and other commercial and property transactions with these assets are concentrated. From this position, precious metals market should suffice industrial and jewelry consumption of precious metals and gems, establish a state's gold reserves, exchange risk cover, and obtain profit through arbitrage.

From institutional point of view, precious metals market is a complex of specifically authorized banks and precious metals exchanges.

Precious metals market includes a complex of different relationships between the market actors at the stages of exploration, mining, processing, etc. till the final production of precious metals products.

The following metals are considered to be precious: gold, silver and the metals of platinum group: platinum, palladium, rhodium, ruthenium, iridium, and osmium. According to the purpose precious metals play a dual role:

  1. they are designated for industrial use (machinery, electronics, medical equipment, prosthesis, etc);
  2. they are the subject of investments (minting, jewelry manufacturing), used as treasure or reserves.

Actually, the gold market was indistinguishable from foreign exchange before 1968, when the exchange rates became floating and the currencies themselves were sold independently from gold. The significant peculiarity of gold market is that the trade is attached to the location of the metal. The trading centers are the following: London, Zurich, New York, and Tokyo. The major gold trading center in the world is London. This is the place of payment for standard gold contracts, i.e. the place where gold is supplied independently of where the deal was made.

Gold serves as: currency asset carrying out some cash functions; regular product with its own production cost influenced by laws of demand and supply as well as speculation.

The largest amount of precious metals trading is observed at international interbank gold market. Interbank market of cashless metal includes a wide range of trading operations; the main one is type 'Spot”.

Operations “Spot” are carried out on spot conditions, i.e. with the depositing-wiring off date on the second day after the day of the deal. All the other metal Buy-Sell deals are called “outright” deals (outright - “incorrect deals”).

The gold deal transaction size on spot conditions at the international market is 100 troy ounces, silver – 5,000 troy ounces, platinum – 100 troy ounces.