Gold Markets

Gold Markets

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Perhaps no other market in the world has the universal appeal of the gold market. For centuries, gold has been coveted for its unique blend of rarity, beauty, and near indestructibility. Nations have embraced gold as a store of wealth and a medium of international exchange; individuals have sought to possess gold as insurance against the day-to-day uncertainties of paper money.

COMEX Division gold futures and options provide an important alternative to traditional means of investing in gold such as bullion, coins, and mining stocks.

Gold futures contracts are also valuable trading tools for commercial producers and users of the metal. Commercial concentrations of gold are found in widely distributed areas: in association with ores of copper and lead, in quartz veins, in the gravel of stream beds, and with pyrites (iron sulfide). Seawater contains astonishing quantities of gold, but its recovery is not economical.

The greatest early surge in gold refining followed the first voyage of Columbus. From 1492 to 1600, Central and South America and the Caribbean islands contributed significant quantities of gold to world commerce. Colombia, Peru, Ecuador, Panama, and Hispaniola contributed 61% of the world's newfound gold during the 17th century. In the 18th century, they supplied 80%.

Following the California gold discovery of 1848, North America became the world's major gold supplier; from 1850 to 1875, more gold was discovered than in the previous 350 years. By 1890, the gold fields of Alaska and the Yukon were the principal sources of supply and, shortly afterwards, discoveries in the African Transvaal indicated deposits that exceeded even these. Today, the principal gold producing countries include South Africa, the United States, Australia, Canada, China, Indonesia, and Russia.

The United States first assigned a formal monetary role for gold in 1792, when Congress put the nation's currency on a bimetallic standard, backing it with gold and silver.

During the Great Depression of the 1930s, most nations were forced to sever their currency from gold in an attempt to stabilize their economies.

Gold formally reentered the world's monetary system in 1944, when the Bretton Woods agreement fixed all the world's paper currencies in relation to the U.S. dollar which in turn was tied to gold. The agreement was in force until 1971, when President Nixon effectively cancelled it by ending the convertibility of the dollar into gold.

Today, gold prices float freely in accordance with supply and demand, responding quickly to political and economic events.

Gold is a vital industrial commodity. It is an excellent conductor of electricity, is extremely resistant to corrosion, and is one of the most chemically stable of the elements, making it critically important in electronics and other high-tech applications.

A broad cross-section of companies in the gold industry, from mining companies to fabricators of finished products, can use the COMEX Division gold futures and options contracts to hedge their price risk. Furthermore, gold has traditionally had a role in investment strategies, and gold futures and options can be found in investors' portfolios

Silver Markets

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Silver has attracted man's interest for thousands of years. In ancient times, silver deposits were plentiful on or near the earth's surface. Relics of ancient civilizations, include jewelry, religious artifacts, and food vessels formed from the durable, malleable metal.

In 1792, silver assumed a key role in the United States monetary system when Congress based the currency on the silver dollar, and its fixed relationship to gold. Silver was used for the nation's coinage until its use was discontinued in 1965.

At the turn of the century, an even more important economic function was emerging for silver, that of an industrial raw material.

Today, silver is sought as a valuable and practical industrial commodity, and as an appealing investment. The largest industrial users of silver are the photographic, jewelry, and electronic industries.

Newly mined metal provides most of the needed supply, and Mexico, the United States, and Peru are the primary producers. Secondary silver sources include coin melt, scrap recovery, and dishoarding from countries where export is restricted. Secondary sources are particularly price sensitive.

Copper Markets

Copper, one of the oldest commodities known to man, is a product with fortunes, which directly reflect the state of the world economy. It is the world's third most widely used metal, after iron and aluminum, and is primarily used in highly cyclical industries such as construction and industrial machinery manufacturing. Profitable extraction of the metal depends on cost-efficient high-volume mining techniques, and supply is sensitive to the political situation particularly in those countries where copper mining is a government-controlled enterprise.

Copper was first worked about 7,000 years ago. Its softness, color, and presence in nature enabled it to be easily mined and fashioned into primitive utensils, tools, and weapons. Five thousand years ago, man learned to alloy copper with tin, producing bronze and giving rise to a new age.

Thus copper was established as a commodity with commercial value.

By the mid-1800s, Britain, with superior smelting technology, controlled more than three-quarters of the world copper trade. As the proportion of metal to waste in rock declined, it became economical to position smelters and refiners adjacent to mining sites and ship the final product directly to market. The discovery, in the 19th century, of major copper deposits in North America, Chile, and Australia challenged England's preeminent position.

Aluminum Markets

Aluminum is a symbol of the 21st century economy. The lightweight, corrosion resistant metal is ubiquitous, finding use in aerospace applications, as a construction material, in packaging, automobiles, railroad cars, and thousands of other applications.

Transportation is the largest single consuming sector, absorbing approximately 30% of U.S. production. Packaging and aluminum containers – all those cans – take another 20%; building and construction absorbs 10%. The high voltage electric transmission lines that are strung from one end of the nation to the other are often made of aluminum.

Aluminum scrap is among the most easily recycled metal available today. In the United States, the recycling of aluminum cans is a billion-dollar business by itself. Practically all beverage containers made in the United States today are aluminum and two-thirds are recycled. The turnaround between the time a can is tossed into a recycling bin, re-smelted, fabricated and back on a store shelf is often only 60 days.

Aluminum production is dependent on a large supply of uninterrupted electric power and energy is a key cost component.

The Exchange's COMEX Division aluminum futures and options contracts provide price transparency to the U.S. aluminum market, valued at about $35 billion per year in products and exports.

Platinum Markets

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Platinum is the principal metal of the six-metal group that bears its name; the other platinum group metals are palladium, rhodium, ruthenium, osmium, and iridium. All possess unique chemical and physical qualities that make them vital industrial materials.

Jewelry creates the largest demand for platinum, accounting for 51%. Automotive catalysts take 29% and chemical and petroleum refining catalysts, 13%.

Platinum is used in the computer industry and in other high-tech electronic applications since it is an excellent conductor of electricity, does not corrode, and has a low reactivity with other metals. This sector accounts for about 7% of consumption.

Platinum is among the world's scarcest metals; new mine production totals approximately only 5 million troy ounces a year. In contrast, gold mine production runs approximately 82 million ounces a year, and silver production is approximately 547 million ounces.

Palladium Markets

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Palladium is the other major metal of the platinum group. It is mined with platinum, and resembles it in many respects, yet there are important differences between the two metals. Palladium is also produced as a by-product of nickel mining. Russia supplies about 67% of production, South Africa, 23%; and North America, 8%. Annual production runs approximately 8.1 million ounces. Automotive catalysts are the largest consuming sector, accounting for 63% of demand. Electronic equipment accounts for 21%; dental alloys, 12%; and jewelry, 4%.

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