The value of precious metals in trade traces back to both their high status throughout historical times and their many uses in industry. In many early and tribal civilizations, precious metals, especially gold and silver, were used as currency. This status has carried over into modern times; while silver and gold are not directly used as money any more, they still carry a high perceived value. This is probably why they remain valuable trade commodities and are still pursued aggressively as investments.
Investors see precious metals as valuable because they are rare and also useful. Of course they are the major component in the production of jewelry. But beyond that, they are used in many different industries. This increase in demand directly impacts how precious metals are traded in the commodity markets.
In the commodity markets, precious metals are known as bullion and are only traded in bulk. Bullion can then be cast into ingots, also known as bars, or minted into coins. They come in a large variety of values. Their value is based on both mass and purity of the metal.
Since gold is a medium of exchange as well as a commodity in itself, it remains in high demand. Quality is a major factor in how valuable a given weight of gold is. Most of the demand, around sixty percent, for gold is in decorative art pieces and jewelry. The required amount of gold can only be produced if it is mixed with other non-precious metals such as nickel or copper. Pure gold is hard to manage since it is so soft and malleable. In addition to its use in decorative settings, gold is also used by the electronics industry for the production of computer chips. There are also medical and dental devices which require the use of gold.
Silver is actually more sought after for industrial use than gold. It is a better conductor of both heat and electricity than copper. However, silver is more easily available than gold, and can also be recycled in industrial use, meaning that gold remains more valuable on the commodity market. This is the reason for the high value of recycled gold from older jewelry and coins being advertised to the general public.
Precious metals continue to remain highly valued in the commodity market because they are unique. Many companies like Regal Assets are offering to sell some to individuals looking to diversify their portfolio. As of yet, there is no artificial substitute for these metals.