How Do I Trade Metals?
Many seasoned investors hold metals as part of a balanced portfolio, as these are generally considered hedges against inflation. Metals such as gold and silver can also be treated as safe-haven assets since their scarcity or limited supply provides underlying support to their value.
Gold the most actively traded metal
Among the metals, gold is the most actively traded one because of its intrinsic properties such as durability, malleability, and conductivity but mostly for its wide usage in jewelry. As with most commodities, the price of gold is determined by the market forces of supply and demand. These, in turn, are influenced by risk sentiment, market uncertainty, and inflation trends.
To be specific, investors flock to the safe-haven arms of the shiny metal when things seem to be falling apart in the global economy. These comprise situations such as war, political crisis, recessions, and government debt troubles. After all, with stocks and currencies vulnerable to losses in these scenarios, gold still stands a chance at retaining its value because of its sheer scarcity.
Because of that, gold is often traded by longer-term investors who look for signs of a bull or bear market. Trends or reversals can be determined in tandem with equity indices, as a strengthening stock market is typically indicative of strong economic performance and thereby weaker demand for gold. On the other hand, a bear market reflects weaker fundamentals and leads traders to seek the safety of gold holdings in their portfolios.
Silver and other Metals
Meanwhile, silver is seen as a second-stringer to gold but it does have its own merits. In particular, silver is typically used as an industrial metal, rendering it more sensitive to business conditions and trading activity among companies. Because of that, price fluctuations in the silver market are usually more volatile than that of gold, making a prime candidate for short-term traders.
Platinum is also one of the metals that tend to gain value during times of economic, financial, or political crisis. However, because it is much rarer compared to gold, it does demand a much higher price and is therefore less frequently traded. Still, it could serve as a strong safe-haven alternative especially when gold becomes overbought. Platinum does share some characteristics with silver when it comes to being used in certain industries, making its price sensitive to cyclical business conditions as well.
It's important to note that buying and selling these precious metals don't require the actual delivery of goods so there's no need to worry where to store all those gold bars. This is what is termed as over-the-counter trading (OTC) and there are risks involved. Without a solid risk-management plan in place, you could lose all the money you’ve put into your trading account. Which is why it’s important to use risk management tools like stop loss rates or dealCancellation – they won’t stop you from losing your trade but they may protect the balance of the rest of your account.
Another feature of metals trading is that they offer inflation protection that is not offered by other financial assets, although their prices are still sensitive to currency fluctuations. To take these into consideration, easyMarkets offers precious metals trading against various currencies such as the US dollar, Japanese yen, euro, Australian dollar, British pound, and Canadian dollar among many others. Spot copper and palladium and platinum are also included in the platform.