Now, this post is going to be a hard one to write as I have to be honest and admit I know very little about the stock market. News that the markets had taken a tumble last week due to worries about the Chinese economy seems very removed from the chemistry lab but as always chemistry is right there in the middle of the drama. You only have to look at the periodic table to spot some of the key players – enter the precious metals and base metals.
Precious metals, including gold, silver and platinum, are metals that have high economic value whereas base metals such as copper, lead, nickel are more widely available in nature and cheaper. Both appear in the futures market, a financial exchange where people trade contracts for the future supply of commodities. Although gold has been used in coinage from 600 BC, the futures market for metals can be traced back to the late 18th century with copper the first metal to be traded followed by lead and zinc. Last week gold’s value remained steady but copper, one of China’s biggest exports, took a dive. China is the world’s largest consumer of metals and responsible for about 40 per cent of the world’s copper consumption. However, construction and power generation have both been declining and this is said to have caused the instability. It was thought that gold’s market price may have increased as investors turned to a reliable and safe investment. Gold’s primary uses are not industrial but in jewellery and as a form of currency. The prices are not dictated not by the usual forces as there is much more gold being stored than is being mined. It therefore depends if hoarders wish to release their gold onto the market. The markets for the metals can be volatile – an example of this is platinum. It is a precious metal but has an industrial use within catalytic converters. Legislation on car emissions have kept platinum valuable but the industry is looking at palladium which could effect the long term price of platinum.
The good news is after the six year slump in copper prices the market surged last Friday. But this looks short lived as analysts suspect that the outlook for copper prices remains poor as supply from the world’s mines is expected to run ahead of global demand in 2015. Now I’m not sure if it’s an urban myth but the story doing the rounds when I was at university was that a chemistry student took their student loan, had a good study of the stock markets, did their research and made themselves a tidy profit. Who said chemistry wouldn’t make you a billionaire – Russia’s richest man is Vladimir Potanin with an estimated fortune of $15.4 billion. He is the owner of the nickel and palladium mining company Norilsk Nickel. Might be time to invest a little more time studying the periodic table !