What is an index of precious metals?

The precious metal index is a financial tool that serves as a scale for a basket of certain precious metals such as gold, silver, platinum and palladium. It may also include a list of shares of companies that are in the precious metal industry such as mining companies. Remarkable is the S&P GSCI Precious Metals Index (S&P PMI), which consists of gold and silver. An example of the one that follows the shares would be the Dow Jones Precious Metals Index (DJPMI), which consists of mining and precious metals. According to its design, the precious metal index can be easily accessed by various means and traded on the stock exchange by large investors with colossal funds small private traders with a small amount to be investment.

For example, those in commodities trading can actively trade in an index such as S&P PMI, instead of dating in gold or silver tradingiva. S&P PMI measurements are based on physical gold and silver, which are the basis of the assets actively traded on the futures market. The Futures market is a place where the contractions of the commodity are traded for future delivery. According to the previous five available data, the weight of each rare metal in S&P PMI is more or less reasonable with the average amount and value of production in the world. This weight represents the relative importance of each metal in the global economy and at the same time allows to trade the index by the intended.

Investors can diversify their portfolios by investing in precious metals and an index, such as DJPMI, is one way of allowing this business. DJPMI reflects the performance of the US traded companies that explore and produce gold, silver and platinum. For example, in 2010 there were 12 supplies of components forming DJPMI. The inclusion of stocks in the index is subject to the string of ENT criteria.

It may be a burdensome task to own physical precious metals because the costs associated with itOhou be great. Therefore, most investors prefer to gain access to this class of assets through the index. In this way, they achieve their diversification goals without owning physical metals.

The use of a commodity mutual fund is one of the ways that investors receive exposure to this market. Another way to reach the market is through exchange notes (ETN). In this case, ETNS is a type of debt securities issued by the company and are associated with the performance of the precious metal index. This connection and other factors will create positive or negative results for the investor who has obtained them for his portfolio. For example, the ETN issuer may be reduced and/or the default, which may adversely affect the investor's investment.