There are other metals you can trade besides the precious metals Gold, Silver, Platinum and Palladium. These other metals are called the base metals. Maybe they are called Base metals because they don’t have that shiny appeal but they are important in everyday life. What would you do if there wasn’t any copper around? Copper is used in many ways in our plumbing system. Could we live without it?
A good idea would be to look at the bases more closely. Find the uses and learn about them. These base metals are made up of copper, aluminum, lead, nickel, tin and zinc. The majority of these raw materials are brought to market via mining recycle rates vary for each metal. These are usually a small mining production. Mining today is tougher than it has ever been with the high costs of getting these metals out of the ground. The term base metal informally refers to a metal that oxidizes or corrodes relatively easily. These metals can be traded on the LME (London Metals Exchange). The 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 expiration dates up to three months from trade date, along with contracts that are further out in the future, it also allows for cash trading. LME offers hedging, worldwide reference pricing, and the option of physical delivery to settle metal contracts.
The key purpose that the LME serves is that of the physical storage of these base metals. The LME stockpiles the base metals for physical delivery if these metals contracts are to be redeemed. These stockpiles offer more utility to those outside the physical realm because most of the contracts that are traded are offset before expiration and therefore delivery is not needed. These stockpiles are used for emergency purposes. When there is a global supply and demand imbalance, consumers are able to draw upon the inventory that is hoarded in the hundreds of warehouses strategically located around the world. These stockpiles can fluctuate daily as there is constant inflow and outflow. When analyzing these markets make sure you are up to date on the inventory levels as a huge stockpile is a sign of increase supply and will drive the price of these metals down as the demand shrinks.
Trading in futures and options involves a substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.
