5 Tips for Trading in Precious Metals
Gold bars
Precious metals like gold, silver, and platinum have always been valuable. People have been trading these metals for centuries. Not only have people traded them extensively, but they’ve also used precious metals as currency in the past.
Most people think that emerging asset classes like cryptocurrencies, forex, and others might have rendered precious metals less valuable to investors and traders. However, that’s not the case. Today, precious metals continue to be a mainstay in most savvy traders’ and investors’ portfolios.
Research shows the precious metals trading industry is worth approximately $182 billion. More importantly, experts believe the industry will continue to grow at a compound annual growth rate of 9 percent until 2027. As a result, it’s apparent why so many traders and investors still trade and invest in precious metals.
An Introduction to Trading Precious Metals
Before proceeding further, it’s vital to understand how trading precious metals works. For starters, numerous precious metals exist, including gold, silver, platinum, and palladium. Gold and silver remain as popular as ever, and you’ll find that most traders and investors have either traded or invested in these metals. Here’s a quick rundown of each precious metal:
Gold
Gold remains the most widely traded and sought-after precious metal today. Historically, people have invested and traded gold for centuries. That’s because gold is unique as it’s durable and malleable. In addition, gold also has numerous applications. For instance, you’ll see gold used in dentistry and electronics. Likewise, gold jewelry remains popular.
However, more importantly, traders like gold because it offers them security when traditional asset classes don’t. Gold is remarkably impervious to inflation, political crises, and other catastrophic events, unlike other assets. Many traders include gold in their portfolios to hedge against inflation and deflation. In addition, many also consider gold to be an excellent medium of exchange because it’s globally accepted and can easily be converted into cash.
Typically, gold prices increase when the stock market declines. As a result, you’ll often see investors and traders flocking in droves to buy gold during economic downturns. Gold is also an excellent investment for hedging against market risk because gold prices typically soar while other asset prices drop. Hence, many people consider gold the safest way to preserve their money during such times.
Silver
Silver might not be as sought-after as gold. However, it does have value for investors and traders. The primary reason most traders and investors opt for gold over silver is that silver’s price fluctuations are even more volatile than gold. Typically, silver prices will vary depending on its perceived store of value and its industrial use.
Silver bar
Platinum
Many people often overlook platinum because it usually has a higher trading price than gold. However, it can be an excellent trading commodity. Platinum is also traded around the clock globally on commodities markets. However, since platinum is rarer than gold, its value is often higher. Numerous factors influence platinum prices. For instance, many consider platinum an industrial metal because it’s heavily used by the automobile, petroleum, and computer industry. As a result, demand from these industries often dictates platinum prices.
In addition, you also have to consider that the world’s platinum mines are mostly located in South Africa and Russia. As a result, platinum is more vulnerable to economic and political instability, particularly in these regions. Furthermore, cartels from these nations can significantly influence platinum’s price.
Gold and platinum bars
Palladium
Palladium doesn’t have the same reputation as other precious metals primarily because it has more industrial applications than the others. For instance, you’ll find that palladium is used in most, if not all, types of manufacturing processes. In addition, like platinum, most of the world’s palladium mines are concentrated in a few countries, including the United States, Russia, South Africa, and Canada.
Gold bar
Tips for Trading Precious Metals
Many investors and traders consider precious metals an excellent investment for several reasons. Precious metals have a limited supply, meaning their value will typically increase in the long run.. Likewise, they also have intrinsic value because of their industrial applications. Most precious metals are also excellent for hedging against traditional asset classes, meaning investors and traders often like to include precious metals in their portfolios.
However, before purchasing precious metals, consider several factors. Here are some tips for trading precious metals:
Do Your Research
Each precious metal has its advantages and drawbacks. Ensure that you properly research and understand their mechanics before investing or trading them.
Learn About CFDs
There are multiple ways to purchase and trade precious metals. Let’s assume you’re interested in trading gold. You can purchase gold physically by buying gold bars and bullions, or you can invest in a gold company’s stock. However, both options are risky. Buying and selling physical gold can be challenging and expensive. In addition, you might want to avoid purchasing stocks in a gold mining company because you want toavoid inherent risk exposure to the affairs of a specific company. In such instances, you have the option to use CFDs to trade gold. CFDs enable you to speculate on gold prices without owning gold itself. As a result, it’s an excellent way for traders to bet on gold and profit from its price movements.
Find the Right Platform to Trade Precious Metals
Finding the right platform to trade precious metals is crucial. Ideally, you’ll want to find a trading platform that enables you to create a demo account. Doing so will help you learn more about metals trading without risking your hard-earned money. You’ll also be able to try out your trading strategies without worrying about the risks involved.
Learn About Proper Risk Management Techniques
Precious metals trading works like the trading of any other financial instrument . You have to ensure you follow the proper risk management principles. Otherwise, you’ll incur significant losses. Consider becoming familiar with stop-loss positions and how to use them if you aren’t using them already.
Learn About Moving Average and Candlestick Chart Patterns
You’ll also want to learn about moving averages and candlestick chart patterns if you wish to trade precious metals successfully. Learning how to read these chart patterns and averages will help you determine resistance levels and support levels, enabling you to make better entries and exits in your trades.
Start Trading Precious Metals with Crystal Ball Markets
A plethora of online investment platforms exist. However, the reality is not all online trading platforms are equal. If you’re interested in gold and silver trading, you’ll need a gold trading platform. Unfortunately, few metal trading platforms exist on the internet. However, fortunately, Crystal Ball Markets is one of the best online gold trading sites you’ll find. Visit our website today for more information. Alternatively, you can register with us today to get started.