Precious metals commodities make up a group of metals that are traded on the global commodities market. While there are many precious metals, the only ones traded as commodities are gold, silver, platinum and palladium. Like the rest of the market, the majority of precious metals commodities are sold as potentials rather than actual metal. This means that when a person buys precious metals commodities, he expects a receipt rather than an actual delivery of metal.
A precious metal is a rare, naturally occurring and non-radioactive metal. These metals typically have a high melting point, are softer than base metals and have a pleasing appearance. In the past, precious metals were often used as money or as the basis for money. These metals rarely had any commercial or industrial application; their value was artificially attributed to them.
In modern times, precious metals have a slightly different place. Modern technology has created a commercial application for nearly every type of precious metal. This has increased their cost, as they now have a material value and an applied value. As more uses are found for the metals, their value rises very quickly due to their relative rarity.
A commodity is any material that is basically the same, regardless of its origin. While the matrix materials in a gold mine vary drastically around the world, once the gold is removed, it is considered indistinguishable from gold found anywhere else. As a result, it is possible to sell gold anywhere without needing to make claims as to the actual product; as far as commodities go, gold is always just gold.
The four precious metals commodities are specific metals that are found all over the world and have a historical basis as a value storage metal. Other precious metals are not traded as commodities, often because they are extremely rare or are more important from their commercial applications. For instance, germanium is a common alternative to silicon in semiconductor construction.
When these metals are traded on the commodities market, they are traded as a financial instrument. People usually buy and sell precious metals commodities as options or futures in the hope that that price will rise or fall within a specific amount of time. Most investors see precious metals commodities more as a grouping of charts and numbers than as physical metal. The buying and selling is to make money rather than hold a specific material.