Precious metals have been coveted by civilizations for thousands of years. They are used in industry for producing high value goods and as attractive decorations like jewelry. The demand for gold has been consistent for centuries, making it a stable commodity to trade and a sensible long term investment for many people. Anyone can trade gold and other precious metals, but they should investigate the market before they make any large investments.
What Are Precious Metals?
There are many different metals that people can invest in and they are traded across the world on commodities markets. As well as precious metals there are also base metals. The most commonly traded precious metals are gold, silver, palladium, and platinum. Base metals like copper, lead, zinc, and nickel are also traded on commodities markets but typically at much lower prices. All of these metals are used by industries to produce important goods, including high-tech consumer products, but the precious metals all have a high value without being processed or changed in some way.
The most valuable metal on the market is undoubtedly gold. This metal has been traded for millennia and has been used to back currencies in the past. Its price is closely monitored on the markets, and its value is used as an indicator of economic conditions. The ‘gold spot price’ is the current market price of an ounce of gold and is usually priced in US Dollars.
Investors know this rate as XAUUSD, or gold to US Dollar price and it can change throughout the day as physical gold is bought and sold on the commodities markets. You can track the XAUUSD with TradingView’s live chart and monitor the price for yourself. Trading View has been helping investors big and small track the price of precious and base metals, as well as currencies and stock market prices. Their live charts are constantly updated with the latest information to give investors an accurate picture of the market before they make their trades.
Why Is Gold So Important?
Gold is the king of all metals. Humans have traded gold for thousands of years, and continue to use it in many different ways. There is always a consistent demand for gold, even in challenging economic times. When there is an economic downturn on stock and currency markets, gold often spikes in price. This is because when the future is uncertain, investors turn to a product they know they can trust. In many recent recessions, the price of gold has increased significantly as confidence in currencies and stocks diminishes.
Gold is a versatile metal. As well as being used for jewelry and decoration it is also an important part of many technology products because of its high conductivity. Gold is a part of everything from washing machines to smartphones and laptops but more importantly, it is a valuable alternative to paper currency. Its value, versatility, and its natural properties for conducting both heat and electricity help to make it a safe haven for investors in times of economic uncertainty.
The consistent demand for gold helps to make it a stable commodity. Buying and storing gold is a popular alternative to holding currency or paper money. Currency prices can be affected by many outside pressures, including inflation. Gold’s consistent value allows people to diversify their wealth by storing some of it in physical gold, such as gold bars and coins. Inflation pushes down the value of currency over time, while the price of gold will often remain stable.
How Do You Trade In Precious Metals?
For short to medium term gains, people try to buy gold at a lower price to sell later when the price has risen. The difference between a low price and a high price is called the margin, and it is often very small over a short amount of time. This means that investors need to buy large amounts of gold to make a profit. This is how large investment groups and firms use gold to make a profit, but many smaller investors and private holders take a longer term view. Gold prices typically rise over a long period of time, so people can buy gold and hold on to it for years or decades to make larger profits.
There are many businesses that can help investors of any size buy physical gold for them to keep for a long time. Many also offer secure storage too, so small and medium sized investors can keep their bars and coins safe without taking on the responsibility of securing the gold in a vault, safe, or security box at a bank. Large scale investors who keep physical gold like bars and coins will often keep them privately in private vaults or with banks that specialize in precious metal holdings.
Some investors trade in gold futures or derivates like spread bets and CFDs (contract for difference). These trades do not involve physical gold but instead are trades based on the changes in the price of gold over a short period. These are speculations on the price, betting that it will go up or down. This type of trading comes with more risk but is easier to complete as gold bars or coins do not have to be exchanged.
Are Precious Metals A Good Investment?
Whether an investment is right for you or not depends greatly on what you want to get from the investment. Buying and holding physical gold is often seen as a sensible, long term investment that you can use as a hedge against riskier investment products like stocks and shares or as a way to diversify your wealth. The price stability that gold typically enjoys means that it is difficult to make short term profits from buying and selling the commodity without getting involved in derivatives.
The spot price of gold will only become volatile in times of economic strife or uncertainty, and the price usually rises considerably as demand from investors grows in these circumstances. No investment is without risk, but precious metal and physical gold investments are seen as low risk and a sensible way to make a consistent profit over a long time. Before you make any investment you should take a long time to research the risk involved and develop a reasonable investment strategy that serves your needs.
This is only true for investments in physical gold assets like bars and coins. Investing in gold or other precious metal futures, or other derivatives like CFDs or exchange-traded funds (ETFs) comes with added risks. These risks can increase the potential return on investment but they can also increase your chances of taking a loss. If you are looking for a sensible, long term investment with smaller potential risks, then buying physical gold and other valuable precious metals like silver and platinum could be for you.
Every investment portfolio should be diverse. It is a bad idea to keep all your nest eggs in one basket. The stability of the price of gold makes it a sensible hedge investment against more volatile investments like stocks or cryptocurrencies. Physical gold investments provide long term returns, but the potential profits are small compared to other investment products. This reflects its low risk status. When investors are looking for a safer way to store their wealth, with the potential to make a profit in a few years, gold or other precious metals should be a part of their investment portfolio.