Cold Iron in Castle Falkenstein, AKA Star Metal or Star Iron or Meteoric Iron, is Iron that has arrived on Earth by extraterrestrial means. While Iron itself tends to warp magickal energy, Cold Iron has the unique property of actually drawing magickal energy into itself, much like a magnet draws ferrous materials. Because of its natural property of drawing Magickal energy, it is the central component in the construction Sorcerous Engines.
Cold Iron is anathema to Faerie, as lethal to the Faerie as radioactive materials are to mortals... the mere presence of Cold Iron can damage or kill a Faerie. The touch of Cold Iron can be (and often is) lethal, and there are accounts of even the Tuatha De Danu, the greatest of Faerie, being maimed permanently by Cold Iron weapons. Or as Thomas Olam says: "Cold Iron is to Faerie what Kryptonite is to Superman."
It is theorized that all Iron was Cold Iron once, but the magickal energies of the planet Earth has "denatured" the Cold Iron over hundreds of thousands of years to a form that is not lethal (but still uncomfortable) to the Faerie Host. This also explains why Iron from meteors or other extraterrestrial sources remain so potent as Cold Iron... perhaps after many centuries, the potency of such material will attenuate until it is no more powerful than regular Iron.