Online trading has become increasingly popular in recent years. While many people automatically think about stocks and shares when the word ‘trading’ crops up in conversation, there are other ways to make money.
Trading in metals is one option that can create significant returns. In this guide, we’ll take a closer look at precious metals and explore how to generate profits from metal trading.
A brief introduction to trading in metals
Most people are aware that some metals are valuable. For centuries, gold and silver have been synonymous with wealth and status. While many of us may associate gold bars and silver cups with treasure chests and ornate palaces, you don’t have to be a monarch or a marauding pirate to profit from precious metals. Metals like gold, silver and platinum are commodities that carry significant value, and if you invest at the right time, trade metals can be lucrative.
There are several ways to buy metals, including purchasing individual pieces of jewellery or antiques, buying into the stock market, investing in funds or buying solid metal in the form of bars or ingots. The type of investment you make will depend largely on how much money you want to spend and your preferences. Some people will want to invest in a physical asset, while others may be more inclined to put cash into stocks or exchange-traded funds.
Which metals can be traded?
The most commonly traded metals include:
- Gold
- Silver
- Platinum
Less commonly, palladium is traded. A versatile metal, which is often used for industrial applications, palladium can also be mixed with other metals to create jewellery.
Gold
Gold is the metal that usually springs to mind when thinking about precious metals. Gold has been traded for centuries, and it remains a popular choice for those looking to invest and make money. The value of gold depends on market activity, and prices rise and fall, according to how many people are selling. If collectors and investors are keen to sell, the value will drop. If they want to buy and demand increases, prices will rise. There are several driving factors for increased demand in gold, including economic uncertainty, which affects the value of currency, inflation, and political instability. If a war breaks out, for example, investing in gold is often viewed as a safe means of providing in the future.
Silver
Silver is a versatile metal, which is known for its beauty and value, as well as its functionality. Silver’s dual purpose contributes to a more volatile market. Prices often fluctuate more than gold. Like gold, the desire to buy and hoard increases prices, but you also have to take industrial supply and demand into consideration. If there is an increase in demand for silver within the manufacturing industry, for example, this will be reflected in the market. The use of silver in photography in the days before the digital camera is an excellent example of the industrial value bumping prices up.
Platinum
Platinum, like gold and silver, is traded 24-hours-a-day on global markets. During times of political and economic stability, platinum usually fetches higher prices than gold and silver, due to its relative rarity. Like silver, platinum prices are affected by its value as a decorative precious metal, as well as its industrial uses. The automotive industry is the most significant sector, with platinum prices influenced by vehicle production and sales.
Making money from trading metals
Like all investments, there is no guarantee that you’ll make money from buying and trading metals, but there are steps you can take to maximise your chances of success. It pays to undertake extensive research before making any form of investment. Keep a close eye on the markets, understand the factors that drive increases and decreases and look into different options.
There are several avenues you can pursue when trading metals, including buying physical assets, investing in stocks and shares, using exchange-traded funds and putting money into the futures and options markets. If you’re new to investing, or you haven’t traded metals before, it’s wise to seek expert advice, to learn about how the markets work and to weigh up the pros and cons of each option before you spend any money.
Analyse the political and economic landscapes, look at how news headlines are affecting prices and think about your individual objective. Are you searching for a long-term investment option, are you eager to try and generate returns quickly?
Summary
Trading in metals can be lucrative, but as with all investment options, there is no golden ticket to success. Before you buy or trade metals, research, seek advice and take calculated risks.
