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London Gold Market

London gold market

The London bullion market, often referred to as London gold market is entirely different from, but often confused with the London Metal Exchange. Only base metals are traded at the London Metal Exchange (LME), while gold and silver are traded by members of the London Bullion Market Association (LBMA), loosely overseen by the Bank of England. Most of the members are major international banks or bullion dealers and refiners. Five members of the LBMA meet twice daily to "fix" the gold price in a process known as the London Gold Fixing. Gold is traded primarily over-the-counter (OTC) with limited amounts trading on the New York Mercantile Exchange (NYMEX) and Tokyo Commodities Exchange (TOCOM). These forward contracts are known as Gold futures contracts. Spot gold is traded for settlement two business days following the trade date, with a business day defined as a day when both New York and London are open for business. Unlike many commodity markets, the forward market for gold is driven by spot prices and interest rate differentials (similar to foreign exchange forward markets) rather than underlying supply and demand dynamics. This is because gold, like currencies, is borrowed and lent by central banks and in the interbank market. Because interest rates for gold tend to be lower than US domestic interest rates (to encourage gold borrowings so that central banks can earn interest on their large gold holdings), except in exceptional circumstances the gold market tends to be in contango (i.e. the forward price of gold is higher than the spot price). This has historically made it an attractive market for forward sales by gold producers and contributed to an active and relatively liquid derivatives market.

External links


- [http://www.lbma.org.uk LBMA] Category:Commodities market Category:Economy of London

London Metal Exchange

The London Metal Exchange or LME is the futures exchange with the world's largest market in options and futures contracts on base and other metals. As the LME offers contracts with daily expiry dates up to three months from trade date, along with longer dated contracts, it also allows for cash trading. It offers hedging, worldwide reference pricing and storage for physical delivery of trades. It is located at 56 Leadenhall Street, London.

History

The London Metal Market and Exchange Company was founded in 1877 but the market traces its origins back to 1571 and the opening of the Royal Exchange. At first only copper was traded, lead and zinc were soon added but only gained official trading status in 1920. The exchange was closed over WW II and did not re-open until 1952. Other metals traded extended to include aluminium (1978), nickel (1979), aluminium alloy (1992), and silver (1999). Base metals are traded through LMEX since 2000. The total value of the trade is around $2,000 billion annually.

Markets

There is constant inter-office trading through the London Clearing House but some trading is still done by open outcry in the Ring. There are a morning and an afternoon trade, where each of the eight metal contracts are traded in two blocks with a five minute session for each contract (the sessions last from 11.40 until 13.15 and from 15.10 until 16.35, each session includes a ten minute break). The second trading block in the morning is key to setting the Daily Official Exchange rates. After the official trades there is fifteen minutes of "kerb" trading. Trades are in futures, options and TAPOs (traded average price contracts, a form of Asian option). There are eleven companies who have exclusive rights to trade in the Ring and around 100 companies involved in the LME in total. Contrary to popular belief, the precious metals, gold and silver are not traded on the London Metal Exchange, but on the over-the-counter market usually referred to as the London bullion market, by the members of the London Bullion Market Association. Also, platinum and palladium are traded on the London Platinum and Palladium Market.

See also


- List of futures exchanges

External links


- http://www.lme.co.uk/
- httt://www.trabzonspor.net Category:Commodity exchanges Category:Economy of London

Gold

Gold is a chemical element in the periodic table that has the symbol Au (L. aurum) and atomic number 79. A soft, shiny, yellow, dense, malleable, ductile (trivalent and univalent) transition metal, gold does not react with most chemicals but is attacked by chlorine, fluorine and aqua regia. The metal occurs as nuggets or grains in rocks and in alluvial deposits and is one of the coinage metals. For millennia, gold has served as money and is also used in jewelry, dentistry, and in electronics. Gold forms the basis for a monetary standard used by the International Monetary Fund (IMF) and the Bank for International Settlements (BIS). Its ISO currency code is XAU.

Notable characteristics

Gold is a metallic element with a characteristic yellow color, but can also be black or ruby when finely divided, while colloidal solutions are intensely colored and often purple. These colors are the result of gold's plasmon frequency lying in the visible range (due to a relativistic effect), which causes red and yellow light to be reflected, and blue light to be absorbed. It is one of only three metals which have an actual easily-identifiable color; the other two are copper, which is red, and caesium, which has a pale golden color. It is the most malleable and ductile metal known; a single gram can be beaten into a sheet of one square meter, or an ounce into 300 square feet. A soft metal, gold will readily form alloys with many other metals. This can be done to increase its strength, or create several exotic colors, sold for instance in the western United States to the tourist trade as "Black Hills" gold. Adding copper yields a redder metal, iron blue, Silver produces green, aluminium purple, platinum metals white, and natural bismuth together with silver alloys produce black. Native gold contains usually eight to ten per cent silver, but often much more — alloys with a silver content over 20% are called electrum. As the amount of silver increases, the color becomes whiter and the specific gravity lower. Gold is a good conductor of heat and electricity, and is not affected by air and most reagents. Heat, moisture, oxygen, and most corrosive agents have very little chemical effect on gold, making it well-suited for use in coins and jewelry; conversely, halogens will chemically alter gold, and aqua regia dissolves it. Common oxidation states of gold include +1 (gold(I) or aurous compounds) and +3 (gold(III) or auric compounds). Gold ions in solution are readily reduced and precipitated out as gold metal by the addition of virtually any other metal as the reducing agent. The added metal is oxidized and dissolves allowing the gold to be displaced from solution and be recovered as a solid precipitate. Recent research undertaken by Frank Reith of the Australian National University shows that microbes play an important role in the formation of gold deposits, transporting and precipitating gold to form grains and nuggets that collect in alluvial deposits. [http://www.abc.net.au/science/news/enviro/EnviroRepublish_1032376.htm]

Applications

Pure gold is too soft for ordinary use and is hardened by alloying with silver, copper, and other metals. Gold and its many alloys are most often used in jewelry, coinage and as a standard for monetary exchange in many countries. Because of its high electrical conductivity and resistance to corrosion and other desirable combinations of physical and chemical properties, gold also emerged in the late 20th century as an essential industrial metal.
- Gold can be made into thread and used in embroidery.
- Gold performs critical functions in computers, communications equipment, spacecraft, jet aircraft engines, and a host of other products.
- The resistance to oxidation of gold has led to its widespread use as thin layers electroplated on the surface of electrical connectors to ensure a good connection.
- Gold is used in restorative dentistry especially in tooth restorations such as crowns and bridges.
- Colloidal gold (a gold nanoparticle) is an intensely colored solution that is currently studied in many labs for medical, biological and other applications. It is also the form used as gold paint on ceramics prior to firing.
- Chlorauric acid is used in photography for toning the silver image.
- Gold(III) chloride is used as a catalyst in organic chemistry. It is also the usual starting point for making other gold compounds.
- Disodium aurothiomalate is a treatment for rheumatoid arthritis (administered intramuscularly). It inhibits lymphocyte proliferation, lysosomal enzyme release, the release of reactive oxygen species from macrophages, and IL-1 production. However, it can also cause photosensitive rashes, gastrointestinal disturbance, and kidney damage.
- The gold isotope Au-198, (half-life: 2.7 days) is used in some cancer treatments and for treating other diseases.
- Gold is used as a coating enabling biological material to be viewed under a scanning electron microscope.
- Many competitions and honors, such as the Olympics and the Nobel Prize, award a gold medal to the winner (with silver to the second-place finisher, and bronze to the third.)
- Since it is a good reflector of both infrared and visible light, it is used for the protective coatings on many artificial satellites.
- Gold flake is used on and in some gourmet sweets and drinks. Having no reactivity it adds no taste but is taken as a delicacy.
- White gold (an alloy of gold with platinum, palladium, nickel, and/or zinc) serves as a substitute for platinum.
- Green gold (a gold/silver alloy) is used in specialized jewelry while gold alloys with copper (reddish color) are more widely used for that purpose (rose gold).

History

rose gold Gold (Sanskrit jval, Greek χρυσος [khrusos], Latin aurum for "shining dawn", Anglo-Saxon gold, Chinese 金 [jīn]) has been known and highly valued since prehistoric times. It may have been the first metal used by humans and was valued for ornamentation and rituals. Egyptian hieroglyphs from as early as 2600 BC describe gold, which king Tushratta of the Mitanni claimed was as "common as dust" in Egypt. Egypt and Nubia had the resources to make them major gold-producing areas for much of history. Gold is also mentioned several times in the Old Testament. The south-east corner of the Black Sea was famed for its gold. Exploitation is said to date from the time of Midas, and this gold was important in the establishment of what is probably the world's earliest coinage in Lydia between 643 and 630 BC. The European exploration of the Americas was fueled in no small part by reports of the gold ornaments displayed in great profusion by Native American peoples, especially in Central America, Peru, and Colombia. Gold has long been considered one of the most precious metals, and its value has been used as the standard for many currencies (known as the gold standard) in history. Gold has been used as a symbol for purity, value, royalty, and particularly roles that combine these properties (see gold album). Gold in antiquity was relatively easy to obtain geologically; however, 75% of all gold ever produced has been extracted since 1910.[http://www.goldsheetlinks.com/production2.htm] It has been estimated that all the gold in the world that has ever been refined would form a single cube 20 m (66 ft) a side. The primary goal of the alchemists was to produce gold from other substances, such as lead — presumably by the interaction with a mythical substance called the philosopher's stone. Although they never succeeded in this attempt, the alchemists promoted an interest in what can be done with substances, and this laid a foundation for today's chemistry. Their symbol for gold was the circle with a point at its center (☉), which was also the astrological symbol, the Egyptian hieroglyph and the ancient Chinese character for the Sun (now 日). For modern attempts to produce artificial gold, see gold synthesis. During the 19th century gold rushes occurred whenever large gold deposits were discovered, including the California, Colorado, Otago, Australia, Witwatersrand, Black Hills, and Klondike gold rushes. Because of its historically high value, much of the gold mined throughout history is still in circulation in one form or another.

Value

Klondike] Klondike Like other precious metals, gold is measured by troy weight and by grams. When it is alloyed with other metals the term carat or karat is used to indicate the amount of gold present, with 24 carats being pure gold and lower ratings proportionally less. The purity of a gold bar can also be expressed as a decimal figure ranging from 0 to 1, known as the millesimal fineness, such as 0.995. The price of gold is determined on the open market, but a procedure known as the Gold Fixing in London, originating in 1919, provides a twice-daily benchmark figure to the industry. Historically gold was used to back currency in an economic system known as the gold standard in which one unit of currency was equivalent to a certain weight of gold. As part of this system, governments and central banks attempted to control the price of gold by setting values at which they would exchange it for currency. For a long period the United States government set the price of gold at $20.67 per troy ounce ($664.56/kg) but in 1934 the price of gold was set at $35.00 per troy ounce ($1125.27/kg). By 1961 it was becoming hard to maintain this price, and a pool of US and European banks began to act together to defend the price against market forces. On March 17 1968, economic circumstances caused the collapse of the gold pool, and a two-tiered pricing scheme was established whereby gold was still used to settle international accounts at the old $35.00 per troy ounce ($1.13/g) but the price of gold on the private market was allowed to fluctuate; this two-tiered pricing system was abandoned in 1975 when the price of gold was left to find its free-market level. Central banks still hold historical gold reserves as a reserve asset although the level has generally been declining. The largest gold depository in the world is that of the U.S. Federal Reserve Bank, held at Fort Knox. Since 1968 the price of gold on the open market has ranged widely, with a record high of $850/oz ($27,300/kg) on 21 January 1980, to a low of $252.90/oz ($8,131/kg) on 21 June 1999 (London Fixing). Prices have risen to the $500/oz mark in late 2005, due to a depreciation of the US dollar and inflation due to rising energy costs.

Gold and the money supply

In January 1959 US M3 money supply was $288.8 billion, and the Official Gold Holdings of the United States was then 17,335.1 Tonnes, or about 557 million ounces (there are 32,150.7 Troy Ounces in a Tonne). That means that in 1959, there were $518 in circulation for every ounce of gold reserves held by the USA. Although the theoretical price should then have been $518 per ounce, the actual price, as fixed under the gold standard was only $35 an ounce. By August 2005, the US M3 money supply had risen to $9,873.9 billion, whilst at the same time the Official Gold Holdings of the United States had fallen to just 8,133.5 Tonnes, or about 261 million Troy Ounces. This means that today, in 2005, there are $37,831 in circulation for every ounce of gold held by the United States. The above numbers show the falling influence of gold in the monetary system of the world today. Goldbugs believe, or even hope, that one day gold's importance will return as the printing of paper money gets out of control and we end in a hyper-inflationary fiat money collapse.

Restrictions on gold ownership

Because of its use as a reserve store of value, the possession of gold is sometimes restricted or banned. Within the United States, the private possession of gold except as jewelry and coin collecting was banned between 1933 and 1975. President Franklin D. Roosevelt confiscated gold by [http://www.the-privateer.com/1933-gold-confiscation.html Executive Order 6102], and President Richard Nixon closed the gold window by which foreign countries could exchange American dollars for gold at a fixed rate.

Return of a Gold Standard?

In the first few years of the 21st century, reports started to circulate that Malaysia was planning a return to the gold standard -- to issue and use gold dinars as currency in international trade. The purported purpose of this move would be to reduce dependence on the United States dollar as a reserve currency, and to establish a non-debt-backed currency in accord with Islamic law against the charging of interest. [http://www.islamidag.dk/ulamaongold.html] Nonetheless, gold dinar currency has not yet emerged. [http://english.aljazeera.net/NR/exeres/E7515CEE-880E-492F-B225-A94E21D90D2B.htm] [http://www.mineweb.net/columns/american_notes/336075.htm]

Gold in investment portfolios

As a tangible investment gold is sometimes held as part of a portfolio because over the long term gold has an extensive history of maintaining its value. It has in the last century gained ground in relation to fiat currencies owing to inflation. Gold becomes particularly desirable in times of extremely weak confidence and during hyperinflation because gold maintains its value even as fiat money becomes worthless. People who enjoy investing in gold are known as goldbugs. Futures contracts based on gold currently trade on various exchanges around the world. In the US this occurs primarily on COMEX (Commodity Exchange) which is a subsidiary of the New York Mercantile Exchange. Speculation about the future price of gold and other commodities is carried on at COMEX. Recently, gold-based ETFs like [http://finance.yahoo.com/q?s=GLD GLD] have emerged as a more convenient investment vehicle. In some countries such as Switzerland, it is possible to hold physical gold as part of an investment portfolio, due to the absence of taxes and narrow bid-ask spreads, however in other countries portfolio managers sometimes hold gold shares or gold bullion securities as a proxy for the metal itself. Exchange Traded Funds such as Gold Bullion Securities are securities sponsored by the World Gold Council and which are fully backed up by allocated gold held by a custodian. The main Gold Bullion Securities are as follows:
- New York Stock Exchange (NYSE), Symbol:GLD (Streettracks Gold Shares, ISIN No. US8633071043)
- London Stock Exchange (LSE) Symbol GBS (Gold Bullion Securities ISIN No. GB00B00FHZ82)
- Euronext France Symbol:GBS (Gold Bullion Securities ISIN No. GB00B00FHZ82 )
- Australian Stock Exchange (ASX), Symbol:GOLD (Gold Bullion Securities ISIN No. AU00000GOLD7)
- Johannesburg Securities Exchange (JSE), Symbol:GLD (New Gold Debentures ISIN No. ZAE000060067 )

Occurrence

Exchange Traded Fund Due to its relative chemical inertness gold is usually found as the native metal or alloy. Occasionally large accumulations of native gold (also known as nuggets) occur but usually gold occurs as minute grains. These grains occur between mineral grain boundries or as inclusions within minerals. Common gold associations are quartz often as veins and sulfide minerals. The most common sulfide associations are pyrite, chalcopyrite, galena, sphalerite, arsenopyrite, stibnite and pyrrhotite. Rarer mineral associations are petzite, calaverite, sylvanite, muthmannite, nagyagite and krennerite. Gold is widely distributed in the Earth's crust at a background level of 0.03 g/1000 kg (0.03 ppm by weight). Hydrothermal ore deposits of gold occur in metamorphic rocks and igneous rocks; alluvial deposits and placer deposits originate from these sources. The primary source of gold is usually igneous rocks or surface concentrations. A deposit usually needs some form of secondary enrichment to form an economically viable ore deposit: either chemical or physical processes like erosion or solution or more generally metamorphism, which concentrates the gold in sulfide minerals or quartz. There are several primary deposit types, common ones are termed reef or vein. Primary deposits can be weathered and eroded, with most of the gold being transported into stream beds where it congregates with other heavy minerals to form placer deposits. In all these deposits the gold is in its native form. Another important ore type is in sedimentary black shale and limestone deposits containing finely disseminated gold and other platinum group metals. Gold occurs in sea water at 0.1 to 2 mg/t (0.1 to 2 ppb by weight) depending on sample location.

Production

ppb Economic gold extraction can be achieved from ore grades as little as 0.5 g/1000 kg (0.5 ppm) on average in large easily mined deposits, typical ore grades in open-pit mines are 1–5 g/1000 kg (1-5 ppm), ore grades in underground or hard rock mines are usually at least 3 g/1000 kg (3 ppm) on average. Ore grades of 30 g/1000 kg (30 ppm) are usually needed before gold is visible to the naked eye, therefore in most gold mines you will not see any gold. It is claimed, that all the gold that has been mined throughout the history of mankind could be incorporated in a solid ball with a diameter of 27 metres. metre Since the 1880s South Africa has been the source for a large proportion of the world's gold supply. Production in 1970 accounted for 79% of the world supply, producing about 1,000 tonnes, however production in 2004 was 342 tonnes. This decline was due to the increasing difficulty of extraction and changing economic factors effecting the industry in South Africa. The city of Johannesburg was built atop the world's greatest gold finds. Gold fields in the Orange Free State and the Transvaal are deep and require the world's deepest mines. The Second Boer War of 1899–1901 between the British Empire and the white Boers was at least partly over the rights of miners and possession of the gold wealth in South Africa. Other major producers are Canada, United States and Western Australia. Mines in South Dakota and Nevada supply two-thirds of gold used in the United States. Siberian regions of the USSR also used to be significant in the global gold mining industry. Kolar Gold Fields in India is another example of a city being built on the greatest gold deposits in India. In South America, the controversial project Pascua Lama aims at exploitation of rich fields in the high mountains of Atacama, at the border between Chile and Argentina. The idea of producing gold out of lesser metals or other cheap substances has fascinated people throughout the centuries. Scientists, kings and charlatans obsessed with the secret art of alchemy accidentally invented practically useful materials (e.g. porcelain), while searching in vain for the philosopher's stone, which was supposed to turn mercury into gold. Modern science has since proven the impossibility of making gold from other elements via chemical reactions. However, it is possible to obtain infinitesimally small amounts of gold by artificial nuclear transformations in particle accelerators The gold isotopes produced would likely be radioactive. No economically feasible method to manufacture gold artificially has been found and published yet. The possibility of cheap man-made gold would have unforeseen economic and political consequences.

Compounds/isotopes

Although gold is a noble metal, it can form many compounds, auric chloride (AuCl3) and chlorauric acid (HAuCl4) being the most common. Gold compounds can be aurous (univalent, +1) or auric (trivalent, +3). Gold also can under extreme conditions form a +5 state with fluorine (gold pentafluoride, AuF5), as well as (unusually for a metal), a -1 state. Such compounds containing the Au- anion are called aurides and include caesium auride, CsAu, rubidium auride, RbAu, and tetramethylammonium auride, (CH3)4N+ Au-. Gold also forms:
- The AuCl4- ion after dissolving in aqua regia
- Gold halides (F,Cl,Br,I)
- Gold chalcogenides (O, S, Se,Te)
- Gold cluster compounds
- Gold hydrazide: an olive-green powder, AuN2H3, one of several explosive compounds known archaically as aurum fulminans There is only one stable isotope of gold, and 18 radioisotopes with Au-195 being the most stable with a half-life of 186 days.

Precautions

The human body does not absorb gold very well, thus compounds of gold are not normally very toxic. Liver and kidney damage has, however, been reported for up to 50% of arthritis patients treated with gold-containing drugs. Gold used in dentistry is widely regarded as the safest form of restorative material, as well as the most successful.

Symbolism

Gold has been associated with the extremities of utmost evil and great sanctity throughout history. The Golden Calf is a widely-recognised symbol of idolatry and revolt against God; concentration camp guards removed the golden teeth from the mouths of gassed Holocaust victims. In Communist propaganda, the golden pocket watch and its fastening golden chain were the characteristic accessories of the class enemy, the bourgeois and the industrial tycoons. On the other hand, eminent orators such as John Chrysostom were said to have a mouth of gold with a silver tongue. Gold is associated with notable anniversaries, particularly in a 50 year cycle, such as a golden wedding anniversary, golden jubilee, etc. Great human achievements are frequently rewarded with gold, in the form of medals and decorations. Winners of races and prizes are usually awarded the gold medal (such as the Olympic Games and the Nobel Prize), while many award statues are depicted in gold (such as the Academy Awards, the Emmy Awards and the British Academy Film Awards). In the software development cycle "going gold" means releasing a version that is ready for distribution to customers, rather than a buggy beta version. Medieval kings were inaugurated under the signs of sacred oil and a golden crown, the latter symbolizing the eternal shining light of heaven and thus a Christian king's divinely inspired authority. Wedding rings are traditionally made of gold; since it is long-lasting and unaffected by the passage of time, it is considered a suitable material for everyday wear as well as a metaphor for the relationship. In Orthodox Christianity, the wedded couple is adorned with a golden crown during the ceremony, an amalgamation of symbolic rites. The symbolic value of gold varies wildly around the world, even within geographic regions. For example, gold is quite common in Turkey but considered a most valuable gift in Sicily.

References


- [http://periodic.lanl.gov/elements/79.html Los Alamos National Laboratory – Gold]
- [http://www.infoplease.com/ce6/sci/A0821152.html The Columbia Electronic Encyclopedia, 6th ed]

See also


- Gold prospecting
- Gold as an investment
- Colloidal gold
- Socialism and Gold
- 22/22k

External links


- [http://www.webelements.com/webelements/elements/text/Au/index.html WebElements.com – Gold] (also used as a reference)
- [http://mineral.galleries.com/minerals/elements/gold/gold.htm Mineral Galleries - Native Gold]
- [http://www.lateralscience.co.uk/gold/auriferous.html Getting Gold 1898 book]
- Gold Category:Chemical elements Category:Transition metals Category:Numismatics Category:Historical trading items ms:Emas ja:金 simple:Gold th:ทองคำ

Silver

:This page is about silver the chemical element. For the color, see silver (color). See also Silver (disambiguation) Silver is a chemical element in the periodic table that has the symbol Ag (from the traditional abbreviation for the Latin Argentum, from which the Argentina is named) and atomic number 47. A soft white lustrous transition metal, silver has the highest electrical and thermal conductivity of any metal and occurs in minerals and in free form. This metal is used in coins, jewelry, tableware, and photography.

Notable characteristics

photography Silver is a very ductile and malleable (slightly harder than gold) univalent coinage metal with a brilliant white metallic luster that can take a high degree of polish. It has the highest electrical conductivity of all metals, even higher than copper, but its greater cost has prevented it from being widely used in place of copper for electrical purposes. Pure silver also has the highest thermal conductivity, whitest colour, the highest optical reflectivity (although it is a poor reflector of ultraviolet), and the lowest contact resistance of any metal. Silver halides are photosensitive and are remarkable for the effect of light upon them. This metal is stable in pure air and water, but does tarnish when it is exposed to ozone, hydrogen sulfide, or air with sulfur in it. The most common oxidation state of silver is +1; a few +2 compounds are known as well.

Applications

The principal use of silver is as a precious metal and its halide salts, especially silver nitrate, are also widely used in photography (which is the largest single end use of silver). Some other uses for silver are as follows:
- Electrical and electronic products, which need silver's superior conductivity, even when tarnished. For example, printed circuits are made using silver paints, and computer keyboards use silver electrical contacts. Silver is also used in high voltage contacts because it is the only metal that will not arc across contacts, hence it is extremely safe.
- Mirrors which need silver's superior reflectivity for visible light are made with silver as the reflecting material in a process called silvering. Common mirrors are backed with aluminium. silvering
- Silver has been coined to produce money since 700 BCE by the Lydians, in the form of electrum. Later, silver was refined and coined in its pure form. The words for "silver" and "money" are the same in at least 14 languages.
- The metal is chosen for its beauty in the manufacture of jewelry and silverware, which are traditionally made from the silver alloy known as Sterling silver, which is 92.5% silver.
- The malleability, non-toxicity and beauty of silver make it useful in dental alloys for fittings and fillings.
- Silver's catalytic properties make it ideal for use as a catalyst in oxidation reactions; for example, the production of formaldehyde from methanol and air by means of silver screens or crystallites containing a minimum 99.95 weight-percent silver.
- Used to make solder and brazing alloys, electrical contacts, and high capacity silver-zinc and silver-cadmium batteries.
- Silver sulfide, also known as Silver Whiskers, is formed when silver electrical contacts are used in an atmosphere rich in hydrogen sulfide.
- Silver fulminate is a powerful explosive.
- Silver chloride can be made transparent and is used as a cement for glass.
- Silver chloride is also a widely used electrode for pH testing and potentiometric measurement
- Silver iodide has been used in attempts to seed clouds to produce rain.
- In legend, silver is traditionally seen as harmful to supernatural creatures like werewolves and vampires. The use of silver fashioned into bullets for firearms is a popular application.
- Silver oxide is used as a positive electrode (cathode) in watch batteries.
- Colloidal silver is a possible antibacterial / antibiotic treatment that requires further clinical testing to support actual efficacy.
- Silver nitrate (liquid) and silver sulfadiazine cream (SSD Cream) were the "standard of care" for the antibacterial/antibiotic treatment of serious burns until the late 1990's. Now, Acticoat Burn Dressings (activated silver dressings) have largely replaced those earlier treatments.

History

Silver (from Anglo-Saxon seolfor, compare Old High German silabar; Ag is from the Latin argentum) has been known since ancient times. It is mentioned in the book of Genesis, and slag heaps found in Asia Minor and on the islands of the Aegean Sea indicate that silver was being separated from lead as early as the 4th millennium BCE. Silver has been used for thousands of years for ornaments and utensils, for trade, and as the basis for many monetary systems. Its value as a precious metal was long considered second only to gold. In Ancient Egypt and Medieval Europe, it was often more valuable than gold. Associated with the moon, as well as with the sea and various lunar goddesses, the metal was referred to by alchemists by the name luna. goddessOne of the alchemical symbols for silver is a crescent moon with the open part on the left (see picture, right). The metal mercury was thought of as a kind of silver, though the two elements are chemically unrelated; its Latin and English names, hydrargyrum ("watery silver") and quicksilver, respectively, reflect this history. In heraldry, the argent, in addition to being shown as silver (this has been shown at times with real silver in official representations), can also been shown as white. Occasionally, the word "silver" is used rather than argent; sometimes this is done across-the-board, sometimes to avoid repetition of the word "argent" in blazon. Europeans found a huge amount of silver in the New World in Zacatecas and Potosí, which triggered a period of inflation in Europe. The conquistador Pizarro was said to have resorted to having his horses shod with silver horseshoes due to the metal's abundance, in contrast to the relative lack of iron in Peru. Silver, which was extremely valuable in China, became a global commodity, contributing to the rise of the Spanish Empire. The rise and fall of its value affected the world market. The Rio de la Plata was named after silver (in Spanish, plata), and in turn lent the meaning of its name to Argentina. Silver mining was a driving force in the settlement of western North America, with major booms for silver and associated minerals (lead, mostly) in the galena ore silver is most commonly found in. Notable "silver rushes" were in Colorado, Nevada, California and the Kootenay region of British Columbia, notably in the Boundary and "Silvery Slocan".

Occurrence

"Silvery Slocan" Silver is found in native form, combined with sulfur, arsenic, antimony, or chlorine and in various ores such as argentite (Ag2S) and horn silver (AgCl). The principal sources of silver are copper, copper-nickel, gold, lead and lead-zinc ores obtained from Canada, Mexico, Peru, Australia and the United States. This metal is also produced during the electrolytic refining of copper. Commercial grade fine silver is at least 99.9% pure silver and purities greater than 99.999% are available. Mexico is the largest silver producer. According to the Secretary of Economics of Mexico, it produced 80,120,000 troy ounces (2492 metric tons) in 2000, about 15% of the annual production of the world. Because the lion's share of the world's silver deposits happen to be concentrated in the Americas, silver was far more valuable before the Age of Discovery; on average, about one-sixth or one-seventh the cost of gold. Now, however, silver is relatively cheap compared to other precious metals, and a mass of silver is now worth only about 1/60 the same mass of gold. In turn, copper is about 1/70 as valuable as silver.

Isotopes

Naturally occurring silver is composed of the two stable isotopes Ag-107 and Ag-109 with Ag-107 being the most abundant (51.839% natural abundance). Twenty-eight radioisotopes have been characterised with the most stable being Ag-105 with a half-life of 41.29 days, Ag-111 with a half-life of 7.45 days, and Ag-112 with a half-life of 3.13 hours. All of the remaining radioactive isotopes have half-lifes that are less than an hour and the majority of these have half lifes that are less than 3 minutes. This element also has numerous meta states with the most stable being Ag-128m (t
- 418 years), Ag-110m (t
- 249.79 days) and Ag-107m (t
- 8.28 days). Isotopes of silver range in atomic weight from 93.943 u (Ag-94) to 123.929 u (Ag-124). The primary decay mode before the most abundant stable isotope, Ag-107, is electron capture and the primary mode after is beta decay. The primary decay products before Ag-107 are palladium (element 46) isotopes and the primary products after are cadmium (element 48) isotopes. The palladium isotope Pd-107 decays by beta emission to Ag-107 with a half-life of 6.5 million years. Iron meteorites are the only objects with a high enough Pd/Ag ratio to yield measurable variations in Ag-107 abundance. Radiogenic Ag-107 was first discovered in the Santa Clara meteorite in 1978. The discoverers suggest that the coalescence and differentiation of iron-cored small planets may have occurred 10 million years after a nucleosynthetic event. Pd-107 versus Ag correlations observed in bodies, which have clearly been melted since the accretion of the solar system, must reflect the presence of live short-lived nuclides in the early solar system.

Precautions and health effects

Silver plays no known natural biological role in humans, and possible health effects of silver are a subject of dispute. Silver itself is not toxic but most of its salts are and some may be carcinogenic. Hippocrates, the father of modern medicine, wrote that silver had beneficial healing and anti-disease properties, and the Phoenicians used to store water, wine, and vinegar in silver bottles to prevent spoiling. In the early 1900's people would put silver dollars in milk bottles to prolong the milk's freshness. Silver compounds were used successfully to prevent infection in World War I before the advent of antibiotics, and Silver compounds are still widely used externally today to accelerate healing in burn victims. Silver and compounds containing silver (like colloidal silver) can be absorbed into the circulatory system and become deposited in various body tissues leading to a condition called argyria which results in a blue-grayish pigmentation of the skin, eyes, and mucous membranes. Although this condition does not harm a person's health, it is disfiguring and usually permanent. Argyria is rare and mild forms are sometimes mistaken for cyanosis. Silver-ions and silver compounds show a toxic effect on some bacteria, viruses, algae and fungi typical for heavy metals like lead or mercury, but without the high toxicity to humans that is normally associated with them. It's germicidal effects kills many microbial organisms in vitro (i.e. in a test tube or a petri dish). The exact process by which this is done is still not well understood, although several different theories exist. One of these is a process generally known for heavy metals called the oligodynamic effect, which goes a long way explaining the effect on microbial lifeforms but does not explain certain antiviral functions. Today, various kinds of silver compounds, or devices to make solutions or colloids containing silver, are sold as remedies for a wide variety of diseases. Although mostly harmless, some people using these home-made solutions use far too much and develop argyria over a period of months or years, and several have been documented in the last few years in the medical literature, including one possible case of coma associated with a high intake of silver (see medical references). It is strongly advised to notify a doctor when taking silver as a form of self-medication. The widespread use of silver went out of fashion with the invention of antibiotics.

References


- [http://periodic.lanl.gov/elements/47.html Los Alamos National Laboratory – Silver]

External links


- [http://www.webelements.com/webelements/elements/text/Ag/index.html WebElements.com – Silver]
- [http://www.silber-minen.de Chart: Silver in Dollar]
- [http://www.indexmundi.com/en/commodities/minerals/silver/silver_table08.html World mine production of silver, by country]
- [http://www.silverinstitute.org The Silver Institute] A silver industry website
- [http://www.theodoregray.com/PeriodicTable/Elements/047/index.html A collection of silver items] Samples of silver

Publications on health effects


- [http://dermatology.cdlib.org/111/case_reports/argyria/wadhera.html Systemic argyria associated with ingestion of colloidal silver]
- [http://www.neurology.org/cgi/content/full/62/8/1408 Myoclonic status epilepticus following repeated oral ingestion of colloidal silver]
- [http://www.pubmedcentral.gov/articlerender.fcgi?tool=pubmed&pubmedid=185946 Specific Inactivation of Herpes Simplex Virus by Silver Nitrate at Low Concentrations and Biological Activities of the Inactivated Virus]
- [http://www.pubmedcentral.gov/pagerender.fcgi?artid=429446&pageindex=1 Prevention of Herpes Keratoconjunctivitis in Rabbits By Silver Sulfadiazine] Category:Chemical elements Category:Transition metals Category:Silver ja:銀 simple:Silver th:เงิน

Gold Fixing

The Gold Fixing or Gold Fix is the procedure by which the price of gold is set on the London market by the five members of the London gold pool. It is designed to fix a price for settling contracts between members of the London bullion market, but informally the Gold Fixing provides a recognised rate that is used as a benchmark for pricing the majority of gold products and derivatives throughout the world's markets. The first fixing took place on 12 September 1919 amongst the five principal gold bullion traders and refiners of the day: N M Rothschild & Sons, Mocatta & Goldsmid, Pixley & Abell, Samuel Montagu & Co. and Sharps Wilkins. The gold price then was four pounds 18 shillings and ninepence (GBP 4.9375) per troy ounce. Due to wartime emergencies and government controls, the London Gold Fixing was suspended between 1939 and 1954. On 21 January 1980 the Gold Fixing reached its highest ever price of USD 850. The Fixing historically took place twice daily at the City offices of N M Rothschild & Sons in St Swithin's Lane, but since 5 May 2004 it takes place by telephone. In April 2004 N M Rothschild & Sons announced that it planned to withdraw from gold trading and from the London Gold Fixing. Barclays Bank took its place from 7 June 2004, and the chairmanship of the meeting, formerly held permanently by Rothschilds, now rotates annually. A tradition of the London Gold Fixing was that participants could raise a small Union Jack on their desk to pause proceedings. Under the telephone fixing system, participants can register a pause by saying the word "flag", and the chair ends the meeting with the phrase "There are no flags, and we're fixed". The current five participants in the Fixing, who must be members of the London Bullion Market Association, are:
- Scotia-Mocatta — successor to Mocatta & Goldsmid and part of Bank of Nova Scotia
- Barclays Capital — Replaced N M Rothschild & Sons when they abdicated
- Deutsche Bank — Owner of Sharps Pixley, itself the merger of Sharps Wilkins with Pixley & Abell
- HSBC — Owner of Samuel Montagu & Co.
- Société Générale — Replaced Johnson Matthey and CSFB as fifth seat

Related articles


- Gold standard

External links


- [http://www.goldfixing.com London Gold Fixing]
- [http://www.lbma.org.uk/london_faq_fixings.htm Description of the fixing process] from the [http://www.lbma.org.uk/ London Bullion Market Association]
- [http://www.rothschild.com/home/ N M Rothschild & Sons] Fixing

New York Mercantile Exchange

right The New York Mercantile Exchange (NYMEX) is the world's largest physical commodity futures exchange located in New York City. Its two principal divisions are the New York Mercantile Exchange and the New York Commodities Exchange (COMEX) which were once independent companies but are now merged. The New York Mercantile Exchange handles billions of dollars worth of energy products, metals, and other commodities being bought and sold on the trading floor and the overnight electronic trading computer systems. The prices quoted for transactions on the exchange are the basis for prices that people pay for throughout the United States and the World. World The New York Mercantile Exchange, Inc. is a private company which plays a vibrant role in the commercial, civic, and cultural life of New York and supports thousands of jobs. The floor of the NYMEX is regulated by the Commodity Futures Trading Commission, an independent agency of the United States Government. Each individual company that trades on the exchange must send their own independent brokers. Therefore, a few employees on the floor of the exchange represent a big corporation and the exchange employees only record the transactions and have nothing to do with the actual trade. On February 26, 2003, The New York Board of Trade (NYBOT) signed a historic lease agreement with the NYMEX to move into its World Financial Center headquarters and trading facility after the NYBOT's original headquarters and trading floor was destroyed in the September 11, 2001 Terrorist Attacks on the World Trade Center. [http://www.nybot.com/releases/pressRelease.asp?releaseID=565] After the terrorist attacks, the NYMEX has built a $12 million trading floor backup facility on Long Island with 700 trader's booth, 2,000 telephones, and a backup computer system. This expensive backup is needed in case of another terrorist attack on Lower Manhattan or a natural disaster. [http://www.nycp.org/Web_News/General_Partnership/nyt%20-%20Financial%20Backup%20Sites%20How%20Dispersed%20-%201.htm?pagewanted=1]

History of the exchange

Commodity exchanges began in the middle of the 19th century, when businessmen began organizing market forums to make buying and selling of commodities easier. These marketplaces provided a place for buyers and sellers to set the quality, standards, and establish rules of business. By the late 1800s about 1600 marketplaces had sprung up at ports and railroad stations. In 1872, a group of Manhattan dairy merchants got together and created the Butter and Cheese Exchange of New York. Soon, egg trade became part of the business conducted on the exchange and the name was modified to the Butter, Cheese, and Egg Exchange. In 1882, the name finally changed to the New York Mercantile Exchange when opening trade to dried fruits, canned goods, and poultry. As centralized warehouses were built into principal market centers such as New York and Chicago in the early 20th century, exchanges in smaller cities began to disappear giving more business to the exchanges such as the NYMEX in bigger cities. In 1933, the COMEX was established through the merger of four smaller exchanges; the National Metal Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange, and the New York Hide Exchange. On August 3, 1994, the NYMEX and COMEX finally merged under the NYMEX. Now, the NYMEX operates in a state of the art trading facility and office building with two trading floors in the World Financial Center in downtown Manhattan.

Location

The official address of the NYMEX headquarters and trading facility is One North End Avenue, New York, NY 10282-1101. The company has additional offices in Houston, Washington D.C., London, and Hong Kong.

Commodities traded on the exchange


- Aluminum
- Coal
- Copper
- Crude oil
- Electricity
- Gasoline
- Gold
- Heating oil
- Natural gas
- Palladium
- Platinum
- Propane
- Silver

See also


- List of futures exchanges

External links


- [http://www.nfa.futures.org/ National Futures Association]
- [http://www.nymex.com New York Mercantile Exchange Official Website] Category:Commodity exchanges Category:Companies based in New York City

Forward contract

A forward contract is an agreement between two parties to buy or sell an asset (which can be of any kind) at a pre-agreed future point in time. Therefore, the trade date and delivery date are separated. It is used to control and hedge risk, for example currency exposure risk (e.g. forward contracts on USD or EUR) or commodity prices (e.g. forward contracts on oil). One party agrees to buy, the other to sell, for a forward price agreed in advance. In a forward transaction, no actual cash changes hands. If the transaction is collaterised, exchange of margin will take place according to an pre-agreed rule or schedule. Otherwise no asset of any kind actually changes hands, until the maturity of the contract. The forward price of such a contract is commonly contrasted with the spot price, which is the price at which the asset changes hands (on the spot date, usually next business day). The difference between the spot and the forward price is the forward premium or forward discount. A standardized forward contract that is traded on an exchange is called a futures contract.

Example

Suppose Andy owns a house that is valued at $100,000 and that Bob enters into a futures contract to buy the house one year from today. But since Andy knows that he can only get the $100,000 in a years time, he wants to be compensated for the delayed sale. Suppose that the risk free rate of return R (the bank rate) for one year is 4%. So if Andy had sold the house now for $100,000 and put the money in the bank, he would get $104,000. So Andy would want at least $104,000 one year from now for the contract to be worthwhile for him. But Bob knows that the house would fetch $6,000 a year if it was rented out and that Andy has currently rented the property out. So Bob wants to be compensated for the rental income. So Bob would be willing to pay $104,000-$6,000=$98,000. This would be the forward price for the house today.

Mathematical Definition

To generalize, if S_ is the spot price of an asset, PV(D) is the present value of dividends from the asset, and PV(C) is the present value of the costs of maintaining the asset. The forward price is given by the formula: :F(t,T) = S
- (1+R) - PV(D) + PV(C) This can also expressed using continuous rates of interest. Here, S is again the spot price of the asset, r is the risk-free force of interest and I is the present value of the net of dividends/coupons/rent less costs of maintaining the asset (discounted using r). :F = (S - I)e^ If these price relationships do not hold, there is an arbitrage opportunity for a riskless profit. One implication of this is that the presence of a forward market will force spot prices to reflect current expectations of future prices. As a result, the forward price for nonperishable commodities, securities or currency is no more a predictor of future price than the spot price is - the relationship between forward and spot prices is driven by interest rates. For perishable commodities, arbitrage does not have this effect.

See also


- Derivative (finance)
- Forward market
- Hedging
- Option
- Swap (finance) category:Derivatives

Commodity market

Commodity markets are markets where raw or primary products are exchanged. This article focuses on the history and current debates regarding global commodity markets, and is not specific to the markets of any country in particular. It discusses also concerns arising in political economy regarding commodity markets, notably their safety, fairness, and ability to guarantee clearance and closure. It covers physical product (food, metals, electricity) markets but not the ways that services, including those of governments, nor investment, nor debt, can be seen as a commodity. Articles on reinsurance markets, stock markets, bond markets and currency markets cover those concerns separately and in more depth. One focus of this article is the relationship between simple commodity money and the more complex instruments offered in the commodity markets. See List of traded commodities for some commodities and their trading units and places

History

The modern commodity markets have their roots in the trading of agricultural products. While wheat and corn, cattle and pigs, were widely traded using standard instruments in the 19th century in the United States, other basic foodstuffs as soybeans were only added quite recently in most markets. For a commodity market to be established, there must be very broad consensus on the variations in the product that make it acceptable for one purpose or another. The economic impact of the development of commodity markets is hard to over-estimate. Through the 19th century "the exchanges became effective spokesmen for, and innovators of, improvements in transportation, warehousing, and financing, which paved the way to expanded interstate and international trade."

Early history of commodity markets

Historically, dating from ancient Sumerian use of sheep or goats, or other peoples using pigs, rare seashells, or other items as commodity money, people have sought ways to standardize and trade contracts in the delivery of such items, to render trade itself more smooth and predictable. Commodity money and commodity markets in a crude early form are believed to have originated in Sumeria where small baked clay tokens in the shape of sheep or goats were used in trade. Sealed in clay vessels with a certain number of such tokens, with that number written on the outside, they represented a promise to deliver that number. This made them a form of commodity money - more than an "I.O.U." but less than a guarantee by a nation-state or bank. However, they were also known to contain promises of time and date of delivery - this made them like a modern commodity contract. Regardless of the details, it was only possible to verify the number of tokens inside by shaking the vessel or breaking it. At which point, the number or terms written on the outside originally became subject to doubt. Eventually the tokens disappeared, but the contracts remained on flat tablets. This represented the first system of commodity accounting. However, the Commodity status of living things is always subject to doubt - it was hard to validate the health or existence of sheep or goats. Excuses for non-delivery were not unknown, and there are recovered Sumerian letters that complain of sickly goats, sheep that had already been fleeced, etc. If a seller's reputation was good, individual "backers" or "bankers" could decide to take the risk of "clearing" a trade. The observation that trust is always required between market participants later led to credit money. But until relatively modern times, communication and credit were primitive. Classical civilizations built complex global markets trading gold or silver for spices, cloth, wood and weapons, most of which had standards of quality and timeliness. Considering the many hazards of climate, piracy, theft and abuse of military fiat by rulers of kingdoms along the trade routes, it was a major focus of these civilizations to keep markets open and trading in these scarce commodities. Reputation and clearing became central concerns, and the states which could handle them most effectively became very powerful empires, trusted by many peoples to manage and mediate trade and commerce.

Commodity and empire

Europe did not establish a central banking system until the Knights Templar in the 13th century. A series of commodity markets prevailed in medieval Europe throughout that time, as wheat and cheese and iron and wood were traded in more local markets. The gold standard acquired its pre-eminence to back trade, as it did not depend on the constantly-shifting medieval feudal alliances.

Modern commodity markets

Despite the shift to fiat money, and credit money, direct commodity trade and barter has always remained active in the background in some form or another, and seems to have been revived due to global capitalism, wherein nearly every currency is widely traded as a commodity. Traditionally, "money-changing" or "banking" was one of the prime functions of commodity markets. The key difference between the ancient and modern commodity markets appears to be degree to which banking and clearing has been separated and regulated by consent of many governments which have surrendered some national sovereignty to enable the Bank for International Settlements, for instance, to back currencies in global trade, establish common risk and reserve standards, and, in the words of its chairman Andrew Crockett, "hardwire the credit culture". With credit concerns minimized or at least standardized, the commodity markets can then trade equity in enterprises as a "stock market", national currencies in a "money market", and everything else in a "commodity market" of its own.

Hedging

"Hedging", a common (and sometimes mandatory) practice of farming cooperatives, insures against a poor harvest by purchasing futures contracts in the same commodity. If the cooperative has significantly less of its product to sell due to weather or insects, it makes up for that loss with a profit on the markets, since the overall supply of the crop is short everywhere that suffered the same conditions. Whole developing nations may be especially vulnerable, and even their currency tends to be tied to the price of those particular commodity items until it manages to be a fully developed nation. For example, one could see the nominally fiat money of Cuba as being tied to sugar prices, since a lack of hard currency paying for sugar means less foreign goods per peso in Cuba itself. In effect, Cuba needs a hedge against a drop in sugar prices, if it wishes to maintain a stable quality of life for its citizens.

Delivery and condition guarantees

In addition, delivery day, method of settlement and delivery point must all be specified. Typically, trading must end 2 (or more) business days prior to the delivery day, so that the routing of the shipment (which for soybeans is 30,000 kilograms or 1,102 bushels) can be finalized via ship or rail, and payment can be settled when the contract arrives at any delivery point.

Standardization

U.S. soybean futures, for example, are of standard grade if they are "GMO or a mixture of GMO and Non-GMO No. 2 yellow soybeans of Indiana, Ohio and Michigan origin produced in the U.S.A. (Non-screened, stored in silo)," and of deliverable grade if they are "GMO or a mixture of GMO and Non-GMO No. 2 yellow soybeans of Iowa, Illinois and Wisconsin origin produced in the U.S.A. (Non-screened, stored in silo)." Note the distinction between states, and the need to clearly mention their status as "GMO" ("Genetically Modified Organism") which makes them unacceptable to most "organic" food buyers. Similar specifications apply for orange juice, cocoa, sugar, wheat, corn, barley, pork bellies, milk, feedstuffs, fruits, vegetables, other grains, other beans, hay, other livestock, meats, poultry, eggs, or any other commodity which is so traded. The concept of an interchangeable deliverable or guaranteed delivery is always to some degree a fiction. Trade in commodities is like trade in any other physical product or service. No magic of the commodity contract itself makes "units" of the product totally uniform nor gets it to the delivery point safely and on time.

Regulation of commodity markets

Cotton, kilowatt-hours of electricity, board feet of wood, long distance minutes, royalty payments due on artists' works, and other products and services have been traded on markets of varying scale, with varying degrees of success. One issue that presents major difficulty for creators of such instruments is the liability accruing to the purchaser: Unless the product or service can be guaranteed or insured to be free of liability based on where it came from and how it got to market, e.g. kilowatts must come to market free from legitimate claims for smog death from coal burning plants, wood must be free from claims that it comes from protected forests, royalty payments must be free of claims of plagiarism or piracy, it becomes impossible for sellers to guarantee a uniform delivery. Generally, governments must provide a common regulatory or insurance standard and some release of liability, or at least a backing of the insurers, before a commodity market can begin trading. This is a major source of controversy in for instance the energy market, where desirability of different kinds of power generation varies drastically. In some markets, e.g. Toronto, Canada, surveys established that customers would pay 10-15% more for energy that was not from coal or nuclear, but strictly from renewable sources such as wind.

Proliferation of contracts, terms, and derivatives

However, if there are two or more standards of risk or quality, as there seem to be for electricity or soybeans, it is relatively easy to establish two different contracts to trade in the more and less desirable deliverable separately. If the consumer acceptance and liability problems can be solved, the product can be made interchangeable, and trading in such units can begin. Since the detailed concerns of industrial and consumer markets vary widely, so do the contracts, and "grades" tend to vary significantly from country to country. A proliferation of contract units, terms, and futures contracts have evolved, combined into an extremely sophisticated range of financial instruments. These are more than one-to-one representations of units of a given type of commodity, and represent more than simple futures contracts for future deliveries. These serve a variety of purposes from simple gambling to price insurance. The underlying of futures contracts are no longer restricted to commodities.

Oil and fiat

Building on the infrastructure and credit and settlement networks established for food and precious metals, many such markets have proliferated drastically in the late 20th century. Oil was the first form of energy so widely traded, and the fluctuations in the oil markets are of particular political interest. In part this is because transport, agricultural equipment, and protections of supplies by states' military fiat remain critical to trade, and all of this tends to run on oil. At times this leads to some rather ghoulish forms of trade, which demonstrate the interdependence of oil and military matters: Some commodity market speculation is directly related to the stability of certain states, e.g. during the Gulf War, speculation on the survival of the regime of Saddam Hussein in Iraq. Similar political stability concerns have from time to time driven the price of oil. Some argue that this is not so much a commodity market but more of an assassination market speculating on the survival (or not) of Saddam or other leaders whose personal decisions may cause oil supply to fluctuate by military action. The oil market is, however, an exception. Most markets are not so tied to the politics of volatile regions - even natural gas tends to be more stable, as it is not traded across oceans by tanker.

Commodity markets and protectionism

Developing countries (democratic or not) have been moved to harden their currencies, accept IMF rules, join the WTO, and submit to a broad regime of reforms that amount to a "hedge" against being isolated. China's entry into the WTO signalled the end of truly isolated nations entirely managing their own currency and affairs. The need for stable currency and predictable clearing and rules-based handling of trade disputes, has led to a global trade hegemony - many nations "hedging" on a global scale against each other's anticipated "protectionism", were they to fail to join the WTO. There are signs, however, that this regime is far from perfect. U.S. trade sanctions against Canadian softwood lumber (within NAFTA) and foreign steel (except for NAFTA partners Canada and Mexico) in 2002 signalled a shift in policy towards a tougher regime perhaps more driven by political concerns - jobs, industrial policy, even sustainable forestry and logging practices.

Non-conventional commodities

Nature's commodity outputs

Commodity thinking is undergoing a more direct revival thanks to the theorists of "natural capital" whose products, some economists argue, are the only genuine commodities - air, water, and calories we consume being mostly interchangeable when they are free of pollution or disease. Whether we wish to think of these things as tradeable commodities rather than birthrights has been a major source of controversy in many nations. Most types of environmental economics consider the shift to measuring them inevitable, arguing that reframing political economy to consider the flow of these basic commodities first and foremost, helps avoids use of any military fiat except to protect "natural capital" itself, and basing credit-worthiness more strictly on commitment to preserving biodiversity aligns the long-term interests of ecoregions, societies, and individuals. They seek relatively conservative sustainable development schemes that would be amenable to measuring well-being over long periods of time, typically "seven generations", in line with Native American thought.

Weather trading

However, this is not the only way in which commodity thinking interacts with ecologists' thinking. Hedging began as a way to escape the consequences of damage done by natural conditions. It has matured not only into a system of interlocking guarantees, but also into a system of indirectly trading on the actual damage done by weather, using "weather derivatives". For a price, this relieves the purchaser of the following types of concerns: "Will a freeze hurt the Brazilian coffee crop? Will there be a drought in the U.S. Corn Belt? What are the chances that we will have a cold winter, driving natural gas prices higher and creating havoc in Florida orange areas? What is the status of El Niño?"

Emissions trading

Weather trading is just one example of "negative commodities", units of which represent harm rather than good. "Economy is three fifths of ecology" argues Mike Nickerson, one of many economic theorists who holds that nature's productive services and waste disposal services are poorly accounted for. One way to fairly allocate the waste disposal capacity of nature is "cap and trade" market structure that is used to trade toxic emissions rights in the United States, e.g. SO2. This is in effect a "negative commodity", a right to throw something away. In this market, the atmosphere's capacity to absorb certain amounts of pollutants is measured, divided into units, and traded amongst various market players. Those who emit more SO2 must pay those who emit less. Critics of such schemes argue that unauthorized or unregulated emissions still happen, and that "grandfathering" schemes often permit major polluters, such as the state governments' own agencies, or poorer countries, to expand emissions and take jobs, while the SO2 output still floats over the border and causes death. In practice, political pressure has overcome most such concerns - but it remains to be seen whether this is a capacity that depends on U.S. clout. The Kyoto Protocol, which attempted to establish the rudiments of a similar market in global greenhouse gas emissions, failed without U.S. support.

Community as commodity?

This highlights one of the major issues with global commodity markets of either the positive or negative kind. A community must somehow believe that the commodity instrument is real, enforceable, and well worth paying for. A very substantial part of the anti-globalization movement opposes the commodification of currency, national sovereignty, and traditional cultures. The capacity to repay debt, as in the current global credit money regime anchored by the Bank for International Settlements, does not in their view correspond to measurable benefits to human well-being worldwide. They seek a fairer way for societies to compete in the global markets that will not require conversion of natural capital to natural resources, nor human capital to move to developed nations in order to find work. The United Nations, seeking to respond to such concerns, suggested three schemes to overcome these inequities: UNILETS was a simple extension of LETS community money, that would let a community interact with the hard currency of its nation and other nations more as a whole, with less ability for global currency fluctuations to affect local trade and power relations 'within' communities, while clearing via UNILETS would provide a more vigorous competition 'between' communities with different LETS schemes. In effect, this would drive currency markets down into the local level, and permit communities, even villages, to build up substantial local advantages, protecting uniquely well positioned enterprises, in a microcosm of the way that the developed nations protected key industries (autos, steel) as they rose.

A working hour, a breath of air?

The other two schemes were more conventional commodity approaches: time-based money, a means of commodifying human labor time on a local level, and the Global Resource Bank, a proposal to manage global resources "outside national jurisdiction" for global benefit. This would include air, water and genetic resources. Other, newer, schemes under consideration by green economists would replace the "gold standard" with a "biodiversity standard". It remains to be seen if such schemes have any merit other than as political ways to draw attention to the way capitalism itself interacts with life.

Is human life a commodity?

While classical, neoclassical, and Marxist approaches to economics tend to treat labor differently, they are united in treating nature as a resource. The green economists and the more conservative environmental economics argue that not only natural ecologies, but also the life of the individual human being is treated as a commodity by the global markets. A good example is the IPCC calculations cited by the Global Commons Institute as placing a value on a human life in the developed world "15x higher" than in the developing world, based solely on the ability to pay to prevent climate change.

Is free time a commodity?

Accepting this result, some argue that to put a price on both is the most reasonable way to proceed to optimize and increase that value relative to other goods or services. This has led to efforts in measuring well-being, to assign a commercial "value of life", and to the theory of Natural Capitalism - fusions of green and neoclassical approaches - which focus predictably on energy and material efficiency, i.e. using far less of any given commodity input to achieve the same service outputs as a result. Indian economist Amartya Sen, applying this thinking to human freedom itself, argued in his 1999 book "Development as Freedom" that human free time was the only real service, and that sustainable development was best defined as freeing human time. Sen won The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel in 1999 (sometimes incorrectly called the "Nobel Prize in Economics") and based his book on invited lectures he gave at the World Bank.

See also


- currency market
- stock markets
- bond market
- futures exchange
- reinsurance markets
- commodity money
- commodity contract
- hedging
- Commodity
- Seasonal spread trading
- List of traded commodities
- New York Mercantile Exchange
- Chicago Board of Trade
- Euronext.liffe
- London Metal Exchange
- Winnipeg Commodity Exchange

Outside links

Exchanges


- [http://www.cbot.com/ Chicago Board of Trade]
- [http://www.nymex.com/jsp/index.jsp New York Mercantile Exchange]
- [http://www.nybot.com/ New York Board of Trade]
- [http://www.cme.com/ Chicago Mercantile Exchange]
- [http://www.kcbt.com/ Kansas Board of Trade]
- [http://www.mgex.com/ Minneapolis Grain Exchange]
- [http://www.wce.ca/ Winnipeg Commodity Exchange]
- [http://www.mrci.com/client/symbols.asp/ Exchange Information]

Supervising commission


- [http://www.cftc.gov/ Commodity Futures Trading Commission]

Data


- [http://www.futures.tradingcharts.com Commodity quotes, charts, news]

Miscellaneous


- [http://www.FirstEnercastFinancial.com Trader news, data, discussion, and forecasts]
- [http://www.markethotline.com/ Commodity market news and end of day prices]
- [http://www.futuresquotes.com/ Commodity quotes, contract specifications and margin requirments]
- [http://tfc-charts.w2d.com/tafm/ Commodity trading short course]
- [http://www.crbtrader.com/pubs/yb.asp CRB Commodity Yearbook and CD]
- [http://www.rogersrawmaterials.com/page3.html Rogers Commodities Index]
- [http://chinese-school.netfirms.com/Abacus-commodity-index-funds.html Commodity Index Funds]

History of commodity trading

Category:Commerce
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Spot price

The spot price of a commodity, a security or a currency is the price that is quoted for immediate (spot) settlement (payment and delivery). Spot settlement is normally one or two business days from trade date. This is in contrast with a forward price of a futures contract, which is the price at which a commodity may be transacted (bought/sold) now but with settlement to occur at a given future date. The difference between the spot and forward prices of a perishable commodity may be an indication of how market participants expect the price of that commodity to change during the period. For a security or non-perishable commodities (e.g., gold), the difference in spot and forward price is usually just the finance charges and the earnings due to the holder of the security - e.g. on a share the difference in price between the spot and forward price is usually accounted for almost entirely by any dividends payable in the period minus the interest payable on the consideration. Any other price would yield an arbitrage opportunity and riskless profit. As a result, spot prices usually reflect the market participants' expectations of future price changes. Category:Financial markets Category:Securities

Foreign exchange market

The foreign exchange market or currency market or Forex is the market where one currency is traded for another. It is one of the largest markets in the world.

Market participants

Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates. Sometimes they are able to profit from arbitrage. According to the Bank for International Settlements' last triennal study (April 2004) ([http://www.bis.org/publ/rpfx05.htm Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity 2004 - Final Results]), transactions :
- were strictly interdealer (ie interbank) for 53 % ;
- for 33 % involved a dealer (ie a bank) and a fund manager or some other non-bank financial institution;
- and for only 14 % were between a dealer and a non-financial company.

Market liquidity

Foreign exchange markets are unique in the financial world in that exchange rates are highly sensitive to a great variety of factors, many different types of investors have access to the market, the market is very liquid, and currencies are traded around the clock. The main international banks continually provide the market with both bid (buy) and ask (sell) offers. In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time. Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar. On the spot market, according to the BIS study, the most heavily traded products were :
- EUR/USD - 28 %
- USD/JPY - 17 %
- GBP/USD (also called cable) - 14 % and the US currency was involved 89% of transactions, followed by the euro (37%), the yen (20%) and sterling (17%). Although trading in the euro has grown considerably since the currency's creation in January 1999, the foreign exchange market is thus still largely dollar-centered. For instance, trading the euro versus a non-European currency ZZZ will usually involve two trades: EUR/USD and USD/ZZZ. The only exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market.

Around-the-clock market

Big foreign exchange trading centres are located in Hong Kong, Singapore, Paris and Frankfurt amongst others, while the biggest three are New York, Tokyo and London, of which London is the largest. The foreign exchange market is open 24 hours per day throughout the week (closing worldwide Friday afternoon at 5pm New York time, ie 2100 GMT, and reopening Sunday 1900 GMT when Wellington, New Zealand opens on their Monday morning). If the European Market is closed the Asian Market or US will be open on the other hand and so all world currencies can be continually in trade. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets.

Market Size

Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the above-mentioned BIS study :
- $600 billion spot
- $1,300 billion in derivatives, ie
  - $200 billion in outright forwards
  - $1,000 billion in forex swaps
  - $100 billion in options. For various reasons, exchange-traded derivatives never caught on the Forex market as they did on all other financial markets (although attempts to launch currency futures contracts in the early 70s actually predate interest rate or stock index futures).

Bid/Offer spread

Like any market there is a bid/offer spread (difference between buying price and selling price). On major currency crosses, the difference between the price at which a market maker will sell ("ask", or "offer") to a wholesale customer and the price at which the same market-maker will buy ("bid") from the same wholesale customer is minimal, usually only 1 or 2 pips. In the EUR/USD price of 1.4238 a pip would be the '8' at the end. So the bid/ask quote of EUR/USD might be 1.4238/1.4239. This, of course, does not apply to retail customers. To individuals, banks will routinely mark up the difference to say 1.4140 / 1.4340 for transfers, or say 1.3740 / 1.4740 for banknotes or travellers' cheques.

Currency speculation

In our floating point system every cash flow in the world is calculated in some domestic currency. Any currency mismatch in cash flows, whatever they be, will thus generate foreign-exchange risk. The most widespread speculation is of the passive kind. Most people and firms simply do not hedge foreign exchange risk on future cash flows, which amounts to ... reckless gambling, although it is generally not perceived as such. Semi-passive speculation is the next most frequent kind. Investors will routinely speculate on currency fluctuations and realize profits by parking funds in one currency, and after it appreciates in value, switching to another. However, a Belgian dentis