Gold and silver and other precious metals have been considered valuable and cherished since the beginning of civilization. It comes as little surprise that precious metal traders find themselves an advantage over other commodity traders. Base metals trading also gives you access to futures contracts. Trading metals with complex instruments will show you how CFDs work.
Precious metals undoubtedly have high economic value with industrial applications. When you start trading precious metals with a good broker, it does no harm if the trader has previous knowledge of metals markets.
The different types of metals: trading metals
There are diverse kinds of metals that traders can take a position on. generally, they are ‘precious’ or ‘base’. The best-known precious metals are gold, silver, platinum, and palladium. Among the base metals, the most well-known are copper, lead, nickel, and zinc.
Precious metals are generally used for jewelry manufacture and in the minting of currencies. They typically do not oxidize or corrode. They are organically occurring, rare, and have inherent value. Gold is used in devices including iPhones and computer hardware. Certain precious metals are stores of wealth during times of economic uncertainty, called safe-havens.
Base metals tend to corrode, oxidize, or tarnish. Instances include lead, copper, nickel, zinc. These are used in the production of copper pipes, or the manufacturing of alloys like nichrome, an alloy of nickel and chromium.
Gold: top choice for trading metals
Gold is the most popular precious metal globally. A lot of value is credited to this lustrous metal. Gold serves two purposes. It helps Industry and Trading in financial instruments both.
Gold is heat resistant, malleable, and conducts electricity. Industrial consumption accounts for up to 10% of the total gold mined. There are applications in dentistry, medicine, and electronics. Gold has a history as a fabricated metal. Jewelry demand accounts for more than half of total annual production.
Gold value is determined by the market participants at all hours of the day, every day of the week. trading metals like gold works mainly as a function of sentiment. The Gold price is less impacted by laws of supply and demand. The new mine supply is greatly outweighed by the size of above-ground, hoarded gold. Simply put, when hoarders sell, the price movements point downwards. When they wish to buy, a new supply is swiftly absorbed, gold prices driven higher.
There are factors responsible for the greater desire to hoard the shiny yellow metal:
- Systemic financial concerns: when money and banks are deemed unstable and political stability is doubtful, gold is frequently sought out as a safe haven.
- Inflation: When real return rates in the bond, equity, and real estate markets are negative, investors begin preferring gold as the asset that will maintain its value.
- Political crises or war: Political upheaval and war have always pushed investors towards a gold hoarding mode. A lifetime’s worth of savings is made portable and stored till it has to be traded for shelter, foodstuffs, safe passage to a safe haven.
Silver: trading metals without limits
Silver price swings between its role as a store of value and its role as an industrial metal. Silver market price fluctuations are more volatile as compared to gold.
Silver will be hoarded as much as gold. However, the industrial supply/demand equation will also impact silver’s price.
Innovations have impacted silver price in the following manner:
- The digital camera has done away with silver’s predominance in the photography industry.
- With the rise of the middle class in the countries of the East, there has been a marked jump in silver consumption. This has been avoided by silver applications in industries and services that use the precious metal as an input.
- Silver is an essential component in batteries, superconductor applications, and microcircuit markets.
- Platinum, like gold and silver, is traded 24/7 on global commodities markets. It frequently fetches a higher price – per troy ounce – than gold during routine market periods just because it is much rarer. There are factors that decide platinum’s price –
- Platinum is an industrial metal. The real demand for platinum comes from automotive catalysts used to reduce the harmfulness of emissions. Jewelry follows, accounting for the majority of the demand. Petroleum and chemical refining catalytic converters and the computer industry use up the rest.
- Given the automotive Industry’s reliance on platinum, platinum prices are by and large affected mainly by auto sales and production numbers. Clean air laws would demand that car makers install more catalytic converters. There was a momentous change in 2009 when American and Japanese manufacturers began using recycled auto catalysts or using more of a sister metal, palladium.
Palladium: trading metals for innovation
Palladium has many industrial uses. It is similarly in high demand in Industry, with the addition of groundwater treatment.
Pure palladium is malleable. However, it becomes harder when worked upon at room temperature. Renewable energy applications have great use for palladium. The metal is also used as a catalyst in chemical reactions.
Investing and trading precious metals
As a template, we will be looking at the approaches to silver trading and investing first. Your broker or investment bank will have access to diverse ways to buy silver. This could be thru futures contracts silver funds, or companies getting directly advantaged by the price of silver.
Buying silver bullion for smooth trading metals
Silver bullion is the same as silver coins or silver bars. You can buy physical silver as an investment from a reliable bullion exchange or a local bullion dealer. Investors profit from buying bullion silver when they purchase it at a reasonable price, holding onto it till the price rises, subsequently selling it for profit.
Investing in silver ETFs, Mutual Funds, or ETNs
You may invest in silver funds thru your broker or investment bank. Exchange-Traded Funds, ETNs, and mutual funds frequently own silver, their price directly correlated to silver price. Buying a fund that owns silver may be convenient if you would rather not own physical silver. It can be liquid, with the capacity to sell shares back to the open market.
Silver futures contracts: basic trading metals
Speculative investors may buy silver futures to bet on appreciating/depreciating silver prices. Silver futures frequently have options for high leverage. This empowers investors to buy even more by using the broker’s money to leverage their position.
There are publicly traded companies whose operations count silver mining as a concern. These companies are the owners of large swathes of land with silver mines. Said companies profit from the silver price appreciation. That’s in addition to increasing the mining output. Noteworthy publicly traded silver mining companies include Wheaton Precious Metals and First Majestic Silver.
Purchasing silver streaming company stock: innovative trading metals
Silver streaming companies buy silver from silver mining companies, profiting from the silver growth. Possessing stock in silver streaming companies like Franco Nevada and Royal Gold could be another way to add silver to your portfolio, thereby directly benefiting from growth.
Trading Metals: Gold
Investing in gold, regardless of physical metals and gold-related securities, is a complex decision. In case you do decide to buy physical gold, ascertain you are purchasing from a dealer of repute. In case you are buying gold for your retirement account, you have to use a broker to make your purchase and a custodian to hold your gold.
Generally, financial specialists frequently suggest that you ought not to have more than a small percentage of your assets in gold. This is virtually an insurance policy. In the event of your losing almost all your stocks in a crash, your objective of trading metals like gold will follow historical trends and ascend in value.
Gold Futures Markets: trading metals
Day trading gold is short-term price movement speculation. Physical gold is not really dealt with. There is no possession. Instead, the transactions occur electronically, and merely profits/losses show up in the trading account.
There are diverse ways of trading metals like gold. The main way is via a futures contract, which is only an agreement to buy/sell something at a future date. Purchasing a gold futures contract does not imply you have to take possession of the physical commodity.
Day traders close out all contracts – trades – every day, making a profit on the basis of the difference between the price where they bought the contract and the price where they sold it.
Gold futures trade on COMEX. You have to look for GC or a standard gold future, standing for 100 troy gold ounces, and the MGC or micro gold future, standing for 10 troy ounces.
On the futures exchange, gold by $0.10 increments. Called a tick, the increment is the smallest movement a futures contract may make. In case you buy or sell a futures contract, your profit/loss is determined by the number of ticks the price moves away from your entry price.
To reckon your profit/loss, you have to know the contract’s tick value. ABinvesting or InvestBy trading platform will show you how – but it doesn’t hurt if you yourself know. Read our ABInvesting Review.
Gold Futures for successful trading metals
The amount you require in your account to day trade a gold futures contract will be contingent upon your futures broker.
You need a sufficient balance in your account to accommodate possible losses.
You will be needing $2000 in your account for day trading a standard gold futures contract.
Trading metals on the stock exchange: Gold
Yet another way to trade gold is via a fund that trades on a stock exchange. An instance is the SPDR Gold Trust or GLD. You can trade gold price movements in case you have a stock trading account.
The trust possesses gold in reserve. Its value mirrors gold price. SPDR Gold Trust’s price is close to a tenth of the gold price. In case gold futures are trading at $1500, the Gold Trust will trade close to $150.
Precious metal futures & trading metals
Derivatives are futures and futures precious metal options. Futures contracts trade on exchanges. A future position may become a physical position during the delivery period. A buyer/seller may control a precious metal position for a margin or small down payment.
Derivatives offering buyers the right but not the obligation to buy/sell precious metals are options on futures. Options are similar to insurance policies on price. Options sellers are the insurance company, while buyers are the insured party.
Precious metals trading and precious metal prices are therefore intertwined.
Trade precious metals with InvestBy, and access educational materials guiding you to the right use of every financial instrument. Each popular metal is a good investment.
You have to do your homework when choosing an instrument in the world of precious metals. The physical market provides the most direct route for investment and trading metals. There are, however, other vehicles providing diverse comfort levels and liquidity as regards position entry and exit. The risk of your counterpart and what you are buying/selling is all you need to be clear about. Call in InvestBy for a free consultation.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. When trading CFDs with this provider,70% of retail investor accounts lose money. You ought to consider if you understand how CFDs work and if you can afford to take the high risk of losing your money. Please read the complete Risk Disclosure Statement, which gives you a more detailed explanation of the risks involved.
Contracts for Difference (CFDs) are highly leveraged products that are ideally suited to very seasoned traders and investors. CFDs can be highly valuable and provide an opportunity to make a lot of money quickly, but you can also sustain losses just as quickly if you’re not experienced.
1. Is now a good time to invest in silver?
The timing of when to buy is contingent upon the current market and your specific investment aims. Silver may be a great investment opportunity for any investor seeking diversification or hedging against various market conditions.
2. Is silver a good long-term investment?
You could invest in silver solely on the strength of its historical performance. Remember, however, that past performance is no guarantee of future performance. Consult InvestBy to check the compatibility of silver trading with our trading goal.
3. Is purchasing silver bars a good investment?
Buying silver bars may be a good investment if you are seeking the hedging of your portfolio against ongoing economic conditions. These may work for you if you fancy the advantages of having measurable investment assets. Or these are for you if you merely seek a diversified portfolio.
4. What’s the difference between white gold and platinum?
White gold is not platinum. It is a metal mix that is intended to look like platinum. White gold is close to 75% gold and 25% zinc and nickel.
5. Are there alternatives to direct investment in gold and platinum?
If you are not too keen on investing directly in gold and platinum, you may invest in companies that operate in the field. For instance, miners may offer a bit of exposure to commodities that companies mine.