Precious Metals

Contents
What are Precious Metals?..............................................................................................................................3
Best-known Precious Metals............................................................................................................................3
Demand for Precious Metals............................................................................................................................3
Gold and Silver as Investments.........................................................................................................................4
When is a Metal Considered Precious?............................................................................................................4
Reasons to Own Precious Metals Now.............................................................................................................4
Precious Metals Have Been a Solid Hedge against a Declining U.S. Dollar...................................................4
Precious Metals Have Been a Proven Safe-Haven in Times of War, Political Strife and Uncertainty............4
Precious Metals Can Offer Outstanding Price Appreciation and Profit Potential.........................................5
Uncertainty in the Markets..............................................................................................................................5
ANNEXURE A....................................................................................................................................................6
Situation Assessment...................................................................................................................................7
INDEX................................................................................................................................................................7
What are Precious Metals?
A precious metal is a rare metallic chemical element of high economic value.
Chemically, the precious metals are less reactive than most elements, have high lustre,
and have higher melting points than other metals. Historically, precious metals were
important as currency, but are now regarded mainly as investment and industrial
commodities. Gold, silver, platinum, and palladium each have an ISO 4217 currency code.

Best-known Precious Metals

The best-known precious metals are gold (see article on nuggets) and silver. While both
have industrial uses, they are better known for their uses in art, jewellery, and coinage.
Other precious metals include the Platinum Group metals: ruthenium, rhodium, palladium,
osmium, iridium, and platinum, of which platinum is the most widely traded. Here is a list of
metals traded on a daily basis.

Precious Metals Production 2015

Ounces
Gold 54514658
Silver 513346502
Platinum 4497463
Palladium 4542893
Total Insert formula
Tons
Copper 12947252
Zinc 8563362
Nickel 1022154
Lithium 15900
Aluminium 28393136
Iron 1575956320
Manganese 30096759
Titanium 9312962

Demand for Precious Metals

The demand for precious metals is driven not only by their practical use, but also by their
role as investments and a store of value. Platinum is the most expensive of the precious
metals now, but rhodium once traded higher than R6000 per ounce.

Bullion
Precious metals in bulk form are known as bullion and are traded on commodity markets
Bullion metals may be cast into ingots, or minted into coins. The defining attribute of
bullion is that it is valued by its mass and purity rather than by a face value as money.
Many nations mint bullion coins, of which the most famous is probably the gold South
African Kruger rand. Although nominally issued as legal tender, these coins' face value as
currency is far below that of their value as bullion. For instance, the United States mints a
gold bullion coin (the Gold Eagle) at a face value of R50 containing 1 troy ounce (31.1035
g) of gold. Bullion coins' minting by national governments gives them some numismatic
value in addition to their bullion value, as well as certifying their purity. The level of purity
varies from country to country, with some bullion coins of as pure as 99.99% available,
such as the Canadian Gold Maple Leaf. Note that a 100% pure bullion is not possible, as
absolute purity in extracted and refined metals can only be asymptomatically approached.

Gold and Silver as Investments

Gold as an investment and silver as an investment are often seen as a hedge against both
inflation and economic downturn. Silver Coins have become popular with collectors due to
their relative affordability, and unlike most gold and platinum issues which are valued
based upon the markets, silver issues are more often valued as collectables, far higher
than their actual bullion value.

When is a Metal Considered Precious?

A metal is deemed to be precious if it is rare. The discovery of new sources of ore or
improvements in mining or refining processes may cause the value of a precious metal to
diminish. The status of a "precious" metal can also be determined by high demand or
market value.

Reasons to Own Precious Metals Now

Investment experts have long-recommended portfolio diversification and that 10% to 20%
(and sometimes more) of an investor's assets be devoted to tangible assets such as gold,
silver and platinum bullion and bullion coins. That's prudent asset diversification strategy at
any time. But in today's uncertain political and economic environment, there are many
(and very sound) reasons to consider investing in precious metals now. Here are three:
Precious Metals Have Been a Solid Hedge against a Declining U.S. Dollar
The value of the U.S. Dollar declined more than 30% from 2001 through 2004, plunging
5% in just a few weeks. For a long list of reasons, including massive increases in U.S.
government deficits totaling trillions of dollars, the cost of a prolonged war against
terrorism, and a massive trade imbalance, this trend may be just the beginning. This
means U.S. Dollars could now be worth less and less every day. Which also means that
investments pegged to the U.S. Dollar could be worth less and less every day. Gold, silver
and platinum, though, are held and traded throughout the world . . . and their true value
(that is, their purchasing power) is not solely or directly dependent on the falling fortunes of
the U.S. Dollar. Precious metals, therefore, can be a form of protection against a falling
U.S. Dollar. As demonstrated during the last few years, as the value of the U.S. Dollar
declined, gold and silver prices and the value of precious metals expressed in dollars
increased.
Precious Metals Have Been a Proven Safe-Haven in Times of War, Political Strife
and Uncertainty
Today's financial markets are increasingly at risk from terrorism, political instability and
war. As we saw so clearly after the 9/11 tragedy, financial markets can be closed down,
and remain closed down, for extended periods of time. As terrorism incidents continue to
increase around the world, it is not unreasonable to expect further (and potentially more
severe) disruptions in financial markets, banking and commerce in the future. Whenever
and wherever tension or hostilities break out, people everywhere quite naturally gravitate
toward the assets they trust most. And today, even in our high-tech driven twenty first
century, the asset class millions rely on in times of trouble is gold and silver. Precious
metals have always been, and likely will continue to be, a valued form of wealth insurance
in good times and bad.
Precious Metals Can Offer Outstanding Price Appreciation and Profit Potential
After the infamous stock market bubble in early 2000 wiped out trillions of dollars of
investor equity, many stocks have failed to return to anywhere close to their previous
highs. The recent dramatic bull market shares some striking similarities to the late nineties.
Gold and silver prices, on the other hand, have increased dramatically - more than 40% -
during that same time period. Which means precious metals can produce impressive
investment returns even when (and sometimes, especially when) returns from stock, bond
and other paper investments decline in value or evaporate completely. And many financial
experts have predicted and continue to forecast rising gold, silver, platinum, and palladium
prices in the months and years ahead.

Uncertainty in the Markets

In our uncertain world of the 21st century, the whims and fancy of a select few can quickly
alter the economic security, stability and order we have come to expect and take for
granted in our free society. In the end, it is the responsibility of each of us, individually, to
be prepared for change, recognize change when it happens, and take the steps necessary
to adapt to change when it occurs.
Nowhere is change more prevalent and pronounced than in the world's financial markets.
Prices on stock and bond markets, and on currency and commodity exchanges, can and
do change throughout each trading day. Periodically, these changes are quite dramatic,
resulting from volatile and unpredictable market conditions. At such times, a diversified
investment portfolio may help protect an investor from the full effect of unanticipated and
potentially disastrous market movements such as a stock market crash.
ANNEXURE A

A question of value investing

Many experts believe that the stock markets, and the mutual funds that invest in
them, are overvalued and potentially at risk for correction similar to the corrections
seen in 1929, 1987 and 2000. Every stock market investor should consider
balancing his market risk with real precious metals and not just gold stocks, which
like all stocks, are subject to business risk as well as market risk (and can be
extremely volatile at times). Historically, physical gold has been a premier and
desirable financial asset in times of market turmoil. Precious metals are one of the
only financial asset classes in an investment portfolio that are not simultaneously
someone else's liability.
1. The prospect of inflation
US monetary policy is biased toward positive, and occasionally high, inflation.
Precious metals can offer inflation protection and profit opportunity, as evidenced by
the skyrocketing precious metal prices in the late 1970s when inflation reached
double-digit rates.
2. Government debt may also spur inflation
Despite political jawboning, our colossal national debt has continued to snowball
and now stands at R8 trillion-plus. Interest payments on this debt now drain the
budget of billions of dollars each month. If history provides any guidance, this
escalating debt could lead to a new wave of inflation, particularly if debt repayment
causes a collapse of Gross Domestic Product.
3. Wealth protection in the 21st century
Many investors are growing increasingly nervous about what they see in the world
today: Increasing levels of domestic and international strife, war and terrorism …
the declining value of the U.S. Dollar eating away at their nest eggs and their
futures … stock, bond and real estate markets that appear chronically overvalued
… and the very real possibilities of inflation, deflation, recession, depression and
tougher times ahead.
4. Uncertain environment
In such an uncertain environment, it is natural – and highly appropriate – to seek
out strategic investment alternatives in order to:
a) Preserve one's wealth; and, ideally, to;
b) Increase one's wealth.
For thousands of years, in good times and bad, precious metals have offered
investors a solid, long-term and tangible way to hold and protect wealth with relative
safety. Unlike paper investments (like stocks, bonds and currencies) that can and
have become worthless overnight, precious metals have true intrinsic value ... and,
hence, will always be valuable. In recent years, precious metals have also proven to
be outstanding short-term trading vehicles, offering traders’ periods of outstanding
profit potential as metals prices fluctuate, sometimes dramatically, on world
markets.
5. Will you consider investing in precious metals?
The decision to investment in precious metals in the end is a personal choice and
knowledge of the markets. For the novice investor, it is all about confidence in the
markets. The stronger the confidence – the more likely the novice investor will
invest in precious metals. However, the seasoned investor will always invest in
alternative forms of wealth to protect his interests and spread the risk.

Situation Assessment

Adapted from: http://www.Metals and Minerals What Are Precious Metals.htm

INDEX
P
political instability............................................................................................................................................................4
political jawboning.......................................................................................................................................................... 6
Precious Metals
gold............................................................................................................................................................................... 3
R
rare................................................................................................................................................................................... 4
T
terrorism........................................................................................................................................................................... 4