It is a process that is followed particularly in the commodity futures market to ascertain whether a product that is deposited in the warehouse conforms to the norms fixed by the exchange.
However, this process is not just confined to the commodity futures alone. Assaying is done in physical markets, too, to determine quality and the price of a produce.
Assaying is defined as a process to analyse the physical sample of a produce to determine its composition and chemical properties. In commodity markets, assaying usually refers to the chemical analysis of a mineral or ore sample to ascertain the content of metals such as gold, copper, uranium, etc.
Samples are obtained from drilling a hole made in a mineral or an ore body, or property that is being evaluated for its properties. A similar process is followed for agricultural produce.
Assaying also provides an indication of the value of a product, be it metal or agricultural, for an investor or a buyer.In the physical markets, assaying can help determine properties of a product.
For example, in agricultural markets assaying will help the buyer know the contents of the product such as protein, grain weight, fibre strength, etc besides its moisture content. Often, a produce with higher moisture commands a lower price.
In the futures market, a seller has to deposit his product in a warehouse, which has a person or agency to assay it.
Once the assaying is done, then a receipt is given providing all details of the product, including its grade. The receipt can also be used to get loans from banks since the assaying gives the product a stamp of quality.
In case of any dispute over the quality of the product that is delivered, the assayer’s certificate comes into play.