The periodic table represents the earth's known chemical elements, including 94 naturally occurring elements and 24 synthetic elements artificially produced in extreme conditions such as in particle accelerators. The periodic table is divided into nine families of elements with similar properties: alkali metals, alkaline metals, transition metals, other metals, metalloids, non-metals, halogens, noble gases, and rare-earth metals. These rare-earth metals, along with a selection of elements known as base and precious metals, provide today's investors and active traders with a variety of trading opportunities.
In chemistry, metals that oxidize or corrode easily are referred to as base metals. These industrial metals include copper (Cu on the periodic table), nickel (Ni), aluminum (Al), zinc (Zn), lead (Pb), tin (Sn) and iron (Fe)/steel (an alloy of iron and carbon). Base metals are generally plentiful and are used in a variety of commercial and industrial applications, such as copper plumbing, aluminum cans and the steel used in automobile production. Because of their abundance, prices for base metals are far below those of both precious and rare-earth metals, and prices respond to changes in demand for the products for which the metals are used.
Investors and traders can participate in the base metals market in a number of ways. Investments can be made in individual companies specializing in particular base metals production, including steel company U.S. Steel (NYSE:X) or aluminum company Alcoa (NYSE: AA). Futures and options contracts of individual metals can be traded, such as copper futures (product symbol: HG) and options (product symbol: HX) on CME Globex. In addition, a wide variety of base metal exchange-traded funds (ETFs) exist, such as Invesco DB Base Metal Fund (NYSE: DBB), which is composed of futures contracts on aluminum, zinc, and copper; SPDR Metals & Mining ETF (NYSE: XME), which is made up of companies involved in the metals and mining industries; and iShares Dow Jones U.S. Basic Materials (NYSE: IYM), which consists of companies involved in the production of basic materials.
Precious metals are naturally occurring metallic chemical elements that have a high luster and melting point, are softer and more ductile than other metals and are less reactive than most elements. Precious metal includes silver (Ag), gold (Au), platinum (Pt) and palladium (Pd). Because of their scarcity, precious metals are valuable – much more so than the base metals. Precious metals are used for jewelry, art, coins, dental work, medical devices, electronics and for investment/holding purposes.
Like base metals, a wide range of investment vehicles are available to those interested in the precious metals markets. Gold has long been considered a solid investment and is often physically held in the form of jewelry, coins or gold bars. Particularly during times of economic uncertainty, gold gains popularity as an investor's security blanket. Aside from physical possession of precious metals, investors can trade stocks, futures, options, mutual funds and exchange-traded funds based on precious metal holdings.
Examples of stocks include Eldorado Gold Corporation (NYSE: EGO), and Agnico-Eagle Mines Limited (NYSE: AEM), both Canadian-based gold producers. CME Group offers investors a choice of gold futures and options contracts: The full-sized contract is based on 100 troy ounces (GC), while the "miNY" gold contract is 50 troy ounces (QO), and the e-micro gold contract is 10 troy ounces (MGC). Gold options are also available in a contract size of 100 troy ounces (OG). Futures and options contracts are also available for silver, platinum, and palladium.
Precious metal ETFs include the physically backed and heavily traded SPDR Gold Trust ETF (NYSE: GLD), Market Vectors Junior Gold Miners ETF (NYSE: GDXJ), iShares Silver Trust ETF (NYSE: SLV), Invesco DB Precious Metals ETF (NYSE: DBP) and PowerShares Global Gold & Precious Metals (Nasdaq: PSAU).
Rare earth metals are becoming increasingly important to the electronics industry and technological advancements. Elements such as lanthanum (La), Cerium (Ce), praseodymium (Pr) and neodymium (Nd) are used in the manufacturing of electronics like cell phones, computer memory chips, cameras, and e-readers. Rare-earths are also a critical component in several military and defense applications, such as night vision goggles, precision-guided weapons, and stealth technology. Although none of the rare-earth metals is especially rare, extracting and processing them is challenging due to their wide geographic distribution, and the environmental concerns with processing (including the release of toxins such as cadmium and radioactive waste). Despite their abundance, rare-earth metals are valuable because they are hard to get, and they are in high demand.
Investors can gain exposure to rare-earth metals through exploration and processing companies such as Molycorp (NYSE: MCP), Freeport-McMoRan (NYSE: FCX) and Thompson Creek Metals Company (NYSE: TC). Market Vectors Rare Earth Strategic Metals (NYSE: REMX) is a popular exchange-traded fund with holdings in rare-earth metal companies.
The Bottom Line
The earth's 118 known elements appear on the periodic table. Among these elements are base metals, precious metals, and rare-earth metals, which provide a variety of opportunities for investors and traders. While gold has been revered for thousands of years and is likely to remain a popular investment, other elements like palladium and neodymium are attracting attention through a variety of trading vehicles including stocks, futures, options and exchange-traded funds. Every investor is unique, so this article should be used for educational and illustrative purposes only. You also need to take your investment horizon, risk aversion, and many other investment criteria into account before making any decisions. Seek qualified investment advice before making any decisions you are unsure about.