How to trade precious metals


What are the different types of metals?

There are several types of metals in which investors can open a position. They are categorized as “precious” or “basic.” The best known precious metals are gold, silver, platinum and palladium, and the best known base metals are copper, lead, nickel and zinc.

What are precious metals?
Precious metals are rare elements, they are found in a free state in nature, and they have inherent value. They do not tend to corrode and do not rust naturally. The main precious metals are considered to be gold, silver, palladium and platinum. All of them are used in jewelry, but they also have a number of different applications.

Precious metals have been used as coins and jewelry throughout human history, and more recently metals such as gold are used in devices such as iPhones and computer hardware. Some precious metals are considered stores of wealth in times of market uncertainty, known as havens.

What are base metals?
Base metals are common metals that rust or corrode naturally. Examples include copper, lead, nickel, and zinc. These metals are used to make products like copper tubes, or to make alloys like nichrome, which is an alloy of nickel and chromium.

Copper is also a popular sculpture material, used in icons like the Statue of Liberty that gets its green hue from oxidized copper.

What are the different precious metals to trade?

It is considered that there are four main precious metals to trade: gold, silver, platinum and palladium. They all have various applications, not only as a historical money store or for use in jewelry, but also in industry, electronics, medicines, and as alloys.

Gold has been used in the production of high-value items for millennia. Today gold is used in jewelry, decoration and, thanks to its conductivity, in the smartphones and computers that we all use every day. It is also the safe asset of choice for many investors in times of market uncertainty.

Silver is a popular metal in industry, where it is used for its conductive, antibacterial, and malleable properties. This means that silver has many applications, including batteries, dentistry, and water purification.

Platinum in its pure form is used in jewelry and dental procedures. It is also popular as an alloy (for example, the platinum-cobalt alloy is used to make magnets). It is also used in some chemotherapy drugs, particularly those that treat testicular and ovarian carcinoma, lung cancer, and lymphomas.

Palladium is a congener of platinum, which means that the two metals share a common structure, origin, or function. More than half of the palladium supply is used in automotive catalytic converters, which are essential tools for converting harmful gases such as carbon monoxide into nitrogen, carbon dioxide, or water vapor.

How to trade precious metals

Precious metals trading using financial derivatives like CFDs allows you to invest in bullish and bearish prices. When trading with us, you can choose whether you want to trade precious metal futures or spot prices.

You will trade these prices with CFDs, so you never have to accept physical delivery of the underlying assets, such as gold or silver.

What factors affect the price of precious metals?

Offer and demand
As with any product or service, the scarcity of precious metals, or a greater need for them, makes them more valuable. For example, if a major silver mine stops production due to a strike, silver prices could rise in the short term.
Upgrading mining equipment could have the opposite effect, speeding up production and saturating the market, driving prices down, assuming demand remains constant.

Economic uncertainty
In times of economic and political instability, precious metals have traditionally been considered safe havens due to their lasting value. We saw this theory in action in 2016, when when Donald Trump was elected as president of the United States, gold rose, as nervous investors turned to it as a safe haven.

Industrial production
Precious metals have many industrial uses, including the manufacture of auto parts, medical devices, electronic components, and jewelry. In addition, new applications are continually being developed. As the demand for these items grows, so does the demand for precious metals.

The strength of the dollar
Since precious metals are priced in dollars, they are particularly susceptible to fluctuations in the value of this currency. When the dollar falls, precious metals are a good place to store dollars, which means that the price of precious metals is likely to increase.

Interest rates
Precious metals offer a desirable alternative for fixed income investors, whose investments offer a lower return when rates are reduced. In this way, the Federal Reserve’s decision-making can guide investors toward these safe-haven opportunities, but the Federal Reserve’s impact on precious metals should not be overstated. The most important thing is how the interest rate announcements affect the dollar.

Quantitative expansion
Precious metals tend to perform best in an environment of rising inflation. This is because quantitative easing, or money printing, dilutes the value of currency in circulation, and makes it more expensive to buy assets that are viewed as a reliable store of value.

Are precious metals a good investment?

Precious metals are considered by many investors to be a good investment, particularly gold, which is known for its safe haven status. Investors often move their money to gold during times of market uncertainty and, due to their applications in jewelry, electrical component manufacturing, auto parts and in industry, precious metals are often in high demand.

To start trading precious metals, you will need a CFD trading account and you will have to decide whether you want to trade precious metals futures or spot.

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