The Ultimate Guide to Precious Metal Trading For Metals Traders

The outlook for the global economy and major currencies is closely linked to the viewpoint for metals trading. The value of precious metals like gold, silver, and platinum has been recognized for a very long time.

What are the different types of metals?

Metal is an element, compound, or alloy usually hard when solid. The appearance is shiny; they are electrically and thermally conductive, malleable, ductile, and flammable. Metals traders can choose from a variety of metals. There are usually two types of precious stones: precious and base. Copper, lead, nickel, and zinc are base metals, while gold, silver, platinum, and palladium are precious metals.

Types of Precious Metals

Typically, metals can be divided into two categories:

• Precious metals – naturally occurring, rare metals 
  

• Base Metals – industrial and commercial metals

The financial value of precious metals derives from their rarity and natural occurrence. Both industrial elements and trade items, they are unique. Manufacturers prefer these metals to make electronic components, jewelry, dental equipment, and catalytic converters. In contrast, traders collect coins and bars made of precious metals. Traders of precious metals view these commodities as money that holds its value better than paper money.

Which precious metals are there?

The intrinsic value of precious metals lies in their rarity as organically occurring metallic elements. As a rule, they tend not to corrode or oxidize, and they do not naturally tarnish. The four primary precious metals are gold, silver, palladium, and platinum - all of which are used in jewelry but also have several other purposes.

Throughout precious metal traders, these kinds of metals have been used for currency and jewelry, and more recently, gold has been used in devices like iPhones and computer software. During market uncertainty, precious metals are viewed as concrete stores of wealth - or safe-havens.

Base metals: what are they?

Metals make up more than 75% of the elements in the periodic table. While we typically think of metals as present in the finished products we use, their origin begins deep underground. Some features are abundant in the earth's crust, such as aluminum and iron, while others, such as palladium and gold, are scarce. The production of even common materials requires tremendous energy and labor.

Base metal is a metal that naturally oxidizes, corrodes, or tarnishes. Lead, zinc, and nickel are examples. As well as copper pipes, these metals are also used to make alloys like nichrome, an alloy of nickel and chromium.In addition to being a popular material for sculptures, oxidized copper is also the source of the green hue on the Statue of Liberty.

What are the primary precious metals to trade? 

It is believed that precious metals are good portfolio diversifiers and inflation hedges - but gold isn't the only precious metal out there for investors. The precious metals portfolio can include commodities like silver, platinum, and palladium, each with risks and opportunities.

Gold

Every day, seven days a week, the gold market determines its value. Its price is primarily determined by sentiment. It is believed that supply and demand have less impact on its price. This is because gold in above-ground hoards vastly outweighs supply from new mines. Tactically, the price drops when hoarders wish to sell. Gold prices are driven higher when they want to buy, as new collections are quickly absorbed.

Throughout history, gold has been used to produce expensive goods. Due to its conductivity, gold is used today in jewelry, decorations, and even in smartphones and computers that we all use every day. Investors also choose it as a safe-haven asset during uncertain times.

Silver

Silver fluctuates between being perceived as a store of value and an industrial metal, unlike gold. Silver's price fluctuation, therefore, is more volatile than gold.

There are many uses for silver in industry, including its conductivity, antibacterial properties, and malleability. Silver can be used in numerous applications, such as batteries, dentistry, and water purification.

Silver trades in a rough way with gold as a hoarding item, but the industrial supply/demand equation also influences its price.

Platinum

Platinum is traded well in global commodities markets, just like gold and silver. As a result of its rarity, it tends to fetch a higher price than gold during the market and political stability periods. Much less metal is extracted from the ground each year.

Jewelry and dental work use pure platinum. Platinum alloys are also popular. Magnets, for instance, are made from platinum and cobalt alloys. It is also included in some chemotherapy drugs, such as those used to treat lung cancer and lymphoma.

Palladium

Palladium, which has a broader range of industrial applications than the above three metals, is less known. Particles of palladium are used in various manufacturing processes, especially for electronics and industrial equipment. It is also used in jewelry as well as dentistry, medicine, chemical applications, jewelry, and groundwater treatment. 

There is a structural, origin, or function similarity between palladium and platinum. Most of the palladium is used to make catalytic converters for automobiles, which convert harmful gases like carbon monoxide into harmless ones like nitrogen or carbon dioxide.

How to trade precious metals? 

Trading in precious metals

You will be speculating on prices rising or falling using financial derivatives, such as spread bets and CFDs through precious metals traders. Trading precious metals futures, spot prices, and options is a choice you have with us. You will trade on these prices using spread bets and CFDs, so you will never need to take delivery of the underlying assets.

Investments in precious metals

There are commodities stocks and exchange-traded funds (ETFs) for those who aren't interested in spread betting and CFDs. There are commodities stocks and exchange-traded funds (ETFs). By investing in the companies that produce and use precious metals, you gain indirect exposure to them. ETFs offer a way to invest in various assets at once, and commodity ETFs - such as gold ETFs - are designed to closely follow the price of that metal in the underlying market.

Factors that impact precious metal pricing

Government Policies

Different governments have adopted other policies regarding precious metals. It recalls that the US purchased all silver produced in the country in the past. It may also decide to increase the amount of gold in its reserves.

Technological Advances

Industrial applications are common for most precious metals. The demand for precious metals may change due to technological advancements. Alternatively, silver futures could be affected by manufacturers substituting silver for less expensive metals such as aluminum.

Inflation & Hyperinflation 

As a result of inflation, currencies weaken, and purchasing power is reduced. Investors use metals as a hedge against a weakening currency. As a result, precious metal prices rise.

What affects the price of precious metals?

Supply and demand

An increase in the need for precious metals or a shortage of them increases the value of a product or service. Silver prices could rise in the short term if production is interrupted at a major silver mine. Assuming demand remains constant, mining equipment improvements might drive prices down by increasing production and saturating the market.

Economic uncertainty

Due to their lasting value, precious metals have traditionally been regarded as safe havens during economic and political instability. As nervous investors flocked to gold when Donald Trump won the US presidency in 2016, we saw this theory in action.

Industrial output

The use of precious metals in a wide range of industrial applications includes manufacturing automotive parts, medical devices, electronics, and jewelry. Innovations are being made all the time. Gold and silver prices rise along with demand for these goods.

Strength of the dollar

Dollar-denominated precious metals are susceptible to fluctuations in the greenback's value. Gold is a good place to store USD when the dollar falls, meaning its price is likely to rise when the dollar falls.

Interest rates

When rates drop, precious metals offer fixed-income investors a more attractive investment option. Due to this, Fed decision-making may lead investors to these safe-haven investments, but the Fed's impact on precious metals should not be overstated. What matters most is how the Fed's rate decisions affect the dollar.

Quantitative easing

In an environment of rising inflation, precious metals usually perform better. The reason for this is that quantitative easing - or money printing - which weakens the currency's value during circulation and makes it more expensive to buy assets that are considered reliable stores of value.

Are precious metals a good investment for you?

Precious metal such as Gold, a safe-haven metal, is regarded as a good investment by many investors. During market uncertainty, investors will often move their money into gold, which is in demand due to its use in jewellery, electrical components, car parts, and industry.

To start trading precious metals, you'll need to open a spread betting or CFD trading account and decide whether you want precious metal traders in the future, options, or spot. Your award-winning trading platform and mobile app will allow you to trade while you learn from our educational resources, including IG Academy. The platform offers technical indicators and risk-management tools, and news and analysis from our analysts.

Alternatively, you can invest directly in precious metals companies with a share dealing account. It will provide you with a better understanding of how precious metals are produced and used. Moreover, you will be able to invest in ETFs that are designed to track the price movements of gold or other precious metals if you open a share dealing account.

The gold jewelry market continues to grow

Gold remains a constant, regardless of trends. Gold jewelry continues to be in high demand across many markets. Gold remains a staple from luxury watches to all sorts of ornate bracelets, earring sets, and armbands. Several markets have even shown signs of the popularity of gold increasing over the last decade. Gold continues to rise in traditional markets with little signs of slowing down. Therefore, any gold investments in your portfolio are even more likely to generate ongoing returns over time. The popularity of gold does not seem to be waning anytime soon. Gold is expected to be a popular choice well into the next century if history is any indication.

Is Gold a Good Investment?

Gold is an investment worth seriously considering. Explore the different ways you can participate in the gold market by speaking with a precious metals expert. Throughout the years, you will see firsthand what gold is capable of.

The futures market for precious metals

Option trading is becoming increasingly popular among retail investors. This also applies to precious metals. As with all options trading, the reward of an outsized gain must be weighed against the risk of losing the entire investment, which goes against the whole idea of investing in precious metals.  

What are the risks of trading precious metals?

Trading in precious physical metals offers you wealth insurance and an opportunity to realize good returns; nonetheless, it also comes with risks, so not every investor is suitable for it. If you consider investing in precious physical metal, you must understand the characteristics and risks involved. There are risks associated with every investment. There is litte bit risk involved in investing in precious metals, even if they come with a certain degree of security. A technical imbalance of more sellers than buyers can cause metal prices to drop. The seller benefits during economic uncertainty since the property's price tend to rise.

Furthermore, you should carefully consider whether investing in precious physical metal is right for you based on your experience, investment horizon, other investments, financial position, risk appetite, and other relevant circumstances.

Here is a list of risks involved while investing in precious metals: 

Price Risk

Market movements determine the price development of precious metals. Thus, the price of your precious metal may be lower than the price at which you bought it, due to the fluctuation in the value of precious metals. You could even lose the value of your entire investment if the value of your precious metal drops to zero.

Exchange rate risk

US dollars are used to measure and trade the value of precious metals. Your investment's value is affected by exchange rate effects since you purchase your precious metal in euros. A dollar appreciation versus the euro has a positive effect, while depreciation has the opposite impact.

Bankruptcy of Bank

Your cash depot is where you keep your cash. The banks both have a good reputation and a stable credit rating. Nevertheless, these banks may go bankrupt or have financial problems, in which case you could lose some or all of your money. There is no deposit guarantee system for SBDG since it is not a bank. 

Trading Interruptions

The company is not able to carry out trading due to exceptional circumstances, so the precious physical metal cannot be sold or purchased. The prices issued after trading has resumed may vary from those issued before the trading interruption.

The company's system, website, the Internet, etc., may be inaccessible, or your own computer may malfunction. Due to this, you may be unable to complete a transaction at the time or at the price you desire.

Operational Risk

A shortcoming in the workings of the company's procedures may lead to errors and fraud not being spotted in time, by dividing tasks effectively, organizing well-documented administration, and ensuring that the agreed procedures are followed.

Identity Theft

If your password is not kept confidential and obtained by a third party, you run third party gaining access risk to your account. It is only possible for this third party to carry out transactions. Cash cannot be transferred to another account. As a result, risk of violating your privacy is high. The first issue is a nuisance; however, the second issue can also lead to losses due to price differences.

Insurance Exclusions

By insuring your valuable metals properly, the company ensures that they are protected from loss and theft. Some policies contain exclusions. No insurance payment will be made if exclusion occurs, and the Company will not be held liable for the damage. The company's website gives information about the insurance policies it offers. These policies specify the cover that is included in the policy.

Conclusion

Numerous products are available on the world's precious metals markets and tools to assist in managing the risks associated with such investments and those associated with dealing with the physical supply chain.

The diversification provided by precious metals is valuable and effective. To be successful with them, you need to know your goals and risk profile before beginning. It's possible to accumulate wealth by taking advantage of precious metal's volatility. On the other hand, doing so can also result in ruin. 

Precious metal Traders and investors alike are enamored with gold, silver, platinum, and palladium. Although they are used in a variety of ways, they're most commonly found inexpensive jewelry. In addition to supply and demand, economic uncertainty and interest rates affect the price of precious metals.

Many market participants consider precious metals a safe haven investment, especially gold. The prices of precious metals can be tracked through spread bets and CFDs, or the metals themselves can be purchased directly.