Trading Precious Metals

Precious metals such as gold and silver have always been used as a means of exchange between traders and as a store of wealth, with gold being the most common.

Learn more about the different types of precious metals, the advantages of trading metals, what affects their value and more.

Gold is considered a safe-haven asset

The value of gold is determined by the market 24 hours a day, seven days a week. When banks and money are considered as unstable, gold is considered a safe-haven asset and is commonly used to hedge against volatility in the US dollar.

The price fluctuations of silver are more volatile than gold

Silver is another popular metal and is used to hedge against volatility in the currency markets.

In contrast to gold, the price of silver moves between its perceived role as a store of value and its role as an industrial metal. Due to this, price fluctuations in the silver market are more volatile than gold.

Platinum is the most volatile of the precious metals

Platinum is considered an industrial metal. The greatest demand is from automotive catalysts. After this, jewellery accounts for the majority of demand.

Platinum is also traded around the clock on global commodities markets. It often tends to reach a higher price (per troy ounce) than gold during routine periods of market and political stability because it is much rarer.

Platinum is the most volatile of the precious metals.

Palladium is not as popular as other precious metals

Palladium is not as popular as gold, silver and platinum. It is a shiny, silver metal used in different types of manufacturing processes, particularly for electronics and industrial products.

What affects the price of precious metals?

Different factors affect the price of precious metals. These include supply and demand, economic uncertainty, industrial output, the strength of the dollar, and interest rates.

The advantages of trading precious metals

A safe form of investment

If you prefer to maintain a low-risk investment portfolio, precious metals such as gold and silver are considered as a safe form of investment as precious metals offer stability when an economic crisis occurs. Even when the economy is not doing well, the value of gold stays the same or even rises at certain times. In addition, gold and silver aren’t affected by any government influence, allowing these precious metals to hold their value.

Protection against inflation

When inflation affects your other financial assets, you don’t have to worry about your precious metals. If you are going to add gold to your portfolio, its price will not change and you can rely on it during times of uncertainty. When you have a supply of gold, it’s an advantage if there’s an inflationary spike because everybody is keen to buy the shiny metal.

Ability to go long or short

With CFDs, you can speculate on price movements in either direction. Therefore, you can go long or short and benefit when the markets are going up or down. In contrast to physical metals trading, trading CFDs on metals provides greater flexibility and liquidity which allows you to go short with less risks than trading the metals themselves.

Diversification

Metals trading offers you the opportunity to diversify your portfolio. Gold is especially popular because of its status as a reliable metal to hedge against US dollar volatility or high inflation.

High liquidity

One of the main advantages of investing in precious metals such as gold and silver is the high liquidity. There are always eager buyers when it comes to selling precious metals so this means you can buy and sell your asset easily and quickly.

Low transaction costs

The low transaction costs connected to online metal trading makes it even more beneficial to traders.

Flexible leverage

Leveraged trading allows you to open a much larger position with less capital in order to gain greater exposure to the asset. Leverage can magnify your potential profits, but at the same time it can magnify your losses.

Are precious metals a wise investment?

Precious metals are regarded as a good investment as they provide an effective means of diversifying a portfolio. Metals provide protection against inflation and low or negative correlation to other asset classes like stocks. This means that even a small percentage of metals in a portfolio will reduce both volatility and risk. The rule to achieving success is to know your goals and risk profile before investing.

DISCLAIMER: This information is not considered as investment advice or an investment recommendation, but is instead a marketing communication