Gold and other precious metals provide an exciting trading opportunity for all types of traders, whether you’re looking for short-term speculation or a long-term investment. Due to their intrinsic value, metals are seen as safe haven investments in times of financial storms and a good asset for portfolio diversification. At the same time, metals can and do go through volatile periods based on economic conditions, and also attract traders that are speculating on short-term price movements.


Read further below to learn the unique characteristics of precious metals and see why they make for a tradeable commodity that can be beneficial in a variety of situations.

 

Why Trade Gold


Gold is the most actively traded of all metals, and for good reason. Its unique properties of durability, malleability and conductivity make it a very desirable and in-demand metal for everything from industrial applications to jewelry. Like most commodities, the price of gold is shaped by market forces of supply and demand. Couple the high demand for gold with a limited supply, and you have all the ingredients for a sought-after commodity that keeps its value over long periods of time.


That isn’t to say, however, that the price of gold is always on the rise. Like everything else that’s traded, it is influenced by risk sentiment, market uncertainty, and inflation trends. In times of economic calamity, however, gold can retain its value better than most financial instruments. While stocks and currencies are vulnerable to situations such as conflict, political or economic crises, or fiscal mishaps from governments, gold’s sheer scarcity gives it a better chance at value retention.


Based on these characteristics, gold is often preferred by traders who are looking for a long-term investment. You can look for bullish or bearing markets, and price trends and reversals can be determined along with equity indices. For instance, a strong stock market is usually reflective of strong economic conditions, and thus weaker demand for gold as an investment. A bearish market, on the other hand, is indicative of weaker fundamentals and can make investors seek gold as a safe holding.

 

Why Trade Precious Metals like Silver and Platinum


Silver is often viewed as a cheaper alternative to gold, but its own unique properties make it quite different from its shinier counterpart. Aside from its use in jewelry, silver has wide applications as an industrial metal. It is hence more susceptible to conditions in the manufacturing industry and business activity among companies who use it. Because of that, price fluctuations are usually more volatile in the silver market in contrast to gold, making it a good candidate for short-term traders.


Platinum, like gold, also tends to gain value during times of economic, financial, or political crisis. It is much rarer compared to gold, however, and commands a much higher price and is thus less traded. All things considered, it can serve as an alternative safe investment, especially when the gold market becomes too active. Platinum also has things in common with silver when it comes to certain industrial uses, making its price sensitive to changing business conditions as well.

 

How to Trade Gold and other Precious Metals

 

Precious metals are traded on a spot basis, and don’t require the actual delivery of physical goods. Metals are traded in standard contract sizes of one lot. One lot of gold, for instance, is 100 troy ounces, while one lot of silver is 5000 troy ounces. You can purchase as little as 0.01 lot of any metal when trading with Equiti. Take a look at our competitive pricing on metals like gold, silver, platinum, and palladium.

You can try your hand at trading precious metals with a risk-free demo account.

 

Margined Forex, CFD and Metals trading are leveraged products and can result in losses that exceed deposits. The value of your contract can fall as well as rise, which could result in receiving back less than you originally deposited. Please ensure you understand the risks and be sure to manage your risk exposure effectively. Equiti does not provide any investment advice.

About the author

The author is an expert in the field of multi-asset trading.