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 luster, 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.
The best-known precious metals are gold and silver. While both have industrial uses, they are better known for their uses in art, jewelry, 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.
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. Palladium was, as of September 8 2006, valued ($326.00 USD per ounce) slightly over half the price of gold ($608.70 USD/ounce), and platinum ($1,222.00 USD/ounce) at around twice that of gold. Silver is substantially less expensive ($12.11 USD/ounce) than these metals, presently at 1/50 the price of gold, but is often traditionally considered a precious metal for its role in coinage and jewellery.
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 Krugerrand. 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 $50 containing 1 troy ounce (31.1035 g) of gold — as of January 2006, this coin is worth about $550 as bullion. 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 asymptotically approached.
One of the largest bullion coins in the world is the 10,000 dollar Australian Gold Nugget coin minted in Australia which consists of a full kilogram of 99.9% pure gold; however China has produced coins in very limited quantities (less than 20 pieces minted) that exceed 260 troy ounces (8 kg) of gold.
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.
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.
An interesting case of a once-precious metal that is now common is that of aluminum. Although aluminium is one of the most commonly occurring elements on Earth, it was initially found to be exceedingly difficult to extract from its various ores. This made aluminium more valuable than gold. Bars of aluminium were exhibited alongside the French crown jewels at the Exposition Universelle of 1855, and Napoleon III was said to have reserved a set of aluminium dinner plates for his most honored guests. Over time, however, the price of the metal gradually dropped; the discovery of the Hall-Héroult process in 1886 caused the high price of aluminium to permanently collapse.