Whether you are a silver trader, love gold trading online or are into precious metals trading, online metal trading is a great way to explore an exciting market and diversify your trading portfolio.
The main precious metals you can trade via CFDs are gold, silver, palladium and platinum. Apart from the main precious metals, we have already mentioned, other precious metals include iridium, rhenium, ruthenium, rhodium, and osmium.
Online Metals Trading: What are precious metals?
Precious metals are rare and usually used in the manufacture of software, various electronic devices, tech equipment and jewellery.
The value of metals is partly determined by supply and demand. Precious metals’ value increases depending on their availability. Other factors such as market sentiment, central banks and geopolitics are examined below in more detail.
What precious metals act as safe havens?
Gold is commonly considered a safe haven asset and investors turn to the yellow metal in times of uncertainty.
While gold’s role as a safe haven asset is widely known, other precious metals have acted as safe havens at different points in time as well. Apart from gold, silver, platinum and palladium also have safe haven properties. In fact, during certain periods, one or more of these metals acted as a stronger safe haven asset than gold did.
Gold trading online
Gold trading online shouldn’t be a complex endeavour as there is plenty of information online. Gold units are measured in troy ounces. Troy ounces are the standard unit of measurement for precious metals. A troy ounce is a unit of measure for weighing precious metals and was first used in Troyes, France. The troy ounce was used in the Middle Ages and is also used today in the pricing of gold, platinum, and silver.
What moves the price of gold?
The price of gold moves depending on a variety of factors, which, as a gold or metal trader, you should be aware of when choosing gold trading online.
Key fundamentals to consider when choosing gold trading online include:
- Supply and demand
Demand for gold comes from jewellery makers, manufacturing, and investment industries. Higher demand and lower supply tend to push the price of gold higher. On the other hand, too much supply and limited demand can push prices lower.
- Market mood and risk appetite
The price of gold rises when investors are pessimistic and the market mood is weak due to political or financial uncertainty or concerns about global economic growth. Gold is considered a safe haven and is used to protect capital in periods such as the ones we are experiencing now, where inflation is very high or there are concerns about an economic recession.
- US dollar
The US dollar affects the price of gold as the precious metal is denominated in US dollars, the global reserve currency. The price of gold tends to fall when the USD strengthens, and vice versa.
- Central banks
Supply and demand can also be influenced by central banks which can increase their reserves and limit supply in the market, or can sell gold and flood the market, pushing the price of gold lower. Apart from the immediate effect of buying and selling, monetary policy decisions such as setting interest rates can influence market conditions, and in turn, affect the price of gold.
Silver is one of the scarcest metals and a popular trading commodity. The symbol of silver is YI. Silver has the most uses of all raw materials. It can be utilized in the production of medical equipment, batteries, water filters, computers, laptops, telephones, and mirrors.
What moves the price of silver?
- Supply and demand
Because silver is mined from the ground, its limited supply can affect its price. The main countries where silver is mined are Mexico, the US, India and China. According to a United States Geological Survey, in 25 years there won’t be any more silver to extract from the ground. That’s why silver trading could become more attractive in the future.
- Industrial Demand
Due to its industrial uses, economic growth can influence the price of silver more than other metals such as gold. Half of the mined silver today is used by the movie industry to manufacture sensitive materials to reflect light. It is also used by the military in the creation of tomahawk missiles. Only 3% of silver is used by the jewellery industry. If demand from these industries changes, then the price of silver changes too.
Platinum can be used as an investment in CFD trading, in the automotive industry in catalytic converters, and in the production of jewellery. It is also used in petroleum refining, electronics, chemicals, glass, and medicine.
What moves the price of platinum?
- Safe-haven asset
Platinum like gold is also considered a safe-haven metal, and high prices for gold can increase traders’ demand for platinum. Safe-haven assets tend to be used as a hedge against the declining prices of other assets.
- Supply and demand
Platinum demand comes from the automotive and jewellery industries which influence platinum’s price. China is the largest platinum consumer of jewellery and a key automotive producer. High demand in China pushes platinum prices higher, and vice versa.
- South Africa and Russia
Platinum resources mainly come from South Africa and Russia, so any political or financial news and events in these two countries can affect the supply and platinum’s price.
- Industrial applications
Platinum is used in different industries including chemicals, electronics and medicine. So, platinum prices can be affected by manufacturing activity and economic data.
Since 1989, palladium has been used by the automotive industry for the production of catalytic converters for fossil fuel and hybrid vehicles. Palladium is also used in electronics, medicine and jewellery.
What moves the price of palladium?
Market sentiment is the key driver of the price of palladium. Global mining supply, industrial demand and spot market availability are also influential.
- Supply and demand
Growing demand for palladium has pushed its price higher.
The supply of palladium was reduced due to the pandemic and Covid-19 lockdowns in South Africa and disruptions in its production in Russia due to the war in Ukraine. Buyers have also rejected Russian palladium due to the war and concerns have grown about its supply in the future.
- Market sentiment
Market sentiment is very influential when it comes to commodities such as precious metals, as traders can diversify their portfolios and speculate on the value of palladium based on investor sentiment and economic releases.
- Higher volatility
Unlike gold, silver and platinum, palladium liquidity is thin and market volatility higher, so traders should be more careful when trading palladium.
- Value of the US dollar
The value of the US dollar affects the prices of palladium which tends to rise when the value of the dollar falls against other currencies, and vice versa.
Advantages of trading metal CFDs online
When trading gold or metal CFDs online, you can take advantage of price movements without actually owning the real asset. It is much cheaper than owning bars of gold for example, and you get to participate in the metals market with less capital.
When trading CFDs, you can use leverage, which means you can borrow funds from your broker and trade with more capital, exploring more trading opportunities. This gives you the ability to multiply your profits, but if the market moves against you, it can also multiply your losses. Makes sure you understand the risks involved and always use leverage carefully.
Trading CFDs on metals is much easier than actually owning the metal, they are liquid so you can buy and sell any time you want and diversify your portfolio.
Disclaimer: This material is for general informational & educational purposes only and should not be considered as investment advice or an investment recommendation. T4Trade is not responsible for any data provided by third parties referenced or hyperlinked, in this communication.