The market of commodities is becoming more attractive to traders. Now, precious metals are interesting not only to jewelry specialists and bankers but to traders as well. If you are here, you are one of the traders who are going to approach this niche. Here are the basics of trading that must be considered by beginners.
How to distinguish from other products
Foremost, we need to clarify this category of traceable assets. Precious metals are raw materials. They have a high value due to their rarity and special features. As a rule, they aren’t prone to corrosion and other natural processes harmful to other metals. High value makes these products great to create jewelry.
The history of valuable metals is very long. In the past, people used to employ gold and silver, for instance, as money. Now, they are used to make sophisticated technology products such as chips for smartphones and computers. From the trading point of view, these goods have always been considered safe havens during volatile periods.
It’s important to understand the difference between precious and base metals. Base metals are also natural commodities but they don’t have features to resist corrosion or tarnish. Such base metals as copper and nickel, for example, are also used in industries to manufacture different products. They are less valuable because they aren’t as rare as precious metals.
The most popular precious metals for trading
Many brokerage services might not offer to trade some profitable commodities. Let’s discover the most popular products from this niche in the market of commodities.
Gold has always had a great reputation as the best store of value and the most attractive metal for the production of expensive products. Gold is also a great conductor. Thanks to this feature, gold pieces are used in electronic gadgets. Also, gold becomes one of the most popular investment products during economic downturns. Why is it so? Learn from this gold trading guide.
Except for conductivity, silver has great malleable properties, which makes it a very useful good in production. Silver is used to creating batteries, for example. Thanks to its antibacterial properties, silver is a very helpful product in dentistry and water purification.
Similar to silver, platinum has great antibacterial properties, which is why it’s so popular in the pharmaceutical industry. Additionally, it’s used to produce pieces of jewelry. Platinum is very efficient in alloys. For example, its alloy with cobalt has the feature of magnetism.
Palladium is one of the crucial metals in the car production industry. It’s used in catalytic converters of cars. These are special tools converting harmful gasses into nitrogen, carbon dioxide, or water vapor.
Things to consider
As with other commodities of investment products, in general, the costs of valuable metals highly depend on numerous factors. When trading these products, you must always take them into account. This will help to make your trading strategy more efficient and profitable. Let’s see which things have the biggest impact on the prices of gold, silver, platinum, etc.
Supply and demand
The lower supply of precious metals facilitates the demand for them. Hence, when there’s a supply shortage of a certain product, its price will spike. For instance, the sanctions against platinum supplies from Russia increased tariffs for this metal worldwide. When the supply increases because of better equipment or new sources, the prices of precious metals drop down.
Precious metals, mainly gold, become very popular during periods of crises or geopolitical instability. We saw how this works multiple times. The more value fiat money loses, the more people invest in gold in hope that it will preserve its value and will be able to preserve the value of invested funds as well.
This fact is partly related to the previous point. During economic uncertainty, FED and other national banks tend to increase interest rates. Such decisions might motivate investors to start looking for more reliable stores of value. In most cases, they prefer investing their money in precious metals.
As a rule, the prices of precious metals increase alongside the growing inflation. This happens because the currency prone to inflation becomes less valuable because of its increased supply in circulation.
Final Verdict: how to trade
If you want to take advantage of the stability of precious metals prices, you need to determine whether you want to trade precious metal futures, at spot, or options. Then, open a CFD trading account with any reliable brokerage service or online exchange. Examine the available possibilities for trading metals and take your time to practice your precious metal trading strategy on a demo account. Trade wisely and choose safe online services to operate your assets.