The Beginner’s Guide To Precious Metals And Trading Prices

Precious metals form a part of every diverse investment portfolio. Stocks and shares may be able to provide a higher return on investment, but they come with a higher risk factor. Sensible, long term investing always includes precious metals, but why? Here is a deep dive into four famous precious metals that most investors include in their investment strategy.

Gold: The Prince Of Precious Metals

The most popular precious metal to trade and hold is gold. This metal has been prized by humans for thousands of years and has been an important part of our shared history. Today, gold is still in high demand, and this consistent demand is one of the reasons it is seen as a sensible long term investment and a ‘safe haven’ from economic crises. When the other markets panic, investors rush to gold as a way to protect their wealth.

Gold has many unique and valuable properties that help to keep its demand high. It is used in the production of a wide range of products, including high-tech gadgets like cell phones and laptops. Gold is also used decoratively as jewelry and is even used in food in high-end, fine-dining restaurants. It is a durable metal that does not rust and is easy to form into shapes or melt. Gold also conducts heat and electricity, which is one of the properties that makes it so valuable to industry as well as investors.

The price of gold is constantly monitored by investors and financial institutions. Its price and how often it is traded is often seen as an indicator of economic health, and when large scale investors begin buying high volumes of gold it is interpreted as a loss of confidence in other markets such as currency or stock markets. Anyone can keep an eye on the ‘spot price’ of gold. With the help of TradingView and their live XAUUSD chart, you can monitor the live price of gold yourself and look at its fluctuation in value over time. This can help you make informed investments in gold and other precious metals.

Silver: Always In Second Place

Do not underestimate the value of silver. It will always be considered gold’s ‘little brother’, but it enjoys many of the same demands that gold does. It is used across multiple industries as it has many unique properties of its own, including antibacterial properties that make it useful in medicine and dentistry. Though silver may not be as highly prized as gold, it is still a useful and valuable precious metal. Because it competes with gold as a place to store value and gold has a more consistent history for demand and value, its price is often set by the demands for silver from industries.

This makes silver prices more volatile than gold, so investors usually buy silver to make short term profits from selling at a higher price just days or weeks later. People who buy gold often hold on to it for much longer. In times of economic uncertainty silver prices will often spike in a similar way to gold as investors look for ways to protect their wealth. Gold gets far more attention in these times, but the value of silver is another safe haven for investment during recessions or stock market crashes.

The price of silver is more volatile as the primary demand for the metal comes from industry, and this demand is affected by many different market forces. The price of silver used to be quite high because of its use in photography. Older cameras used films that contained a lot of silver. As cameras became digital the industrial demand for silver dropped considerably, causing a huge dip in the price. Changes in consumer behavior and the products they use can greatly impact silver prices, making it a less stable long-term investment than its bigger brother; gold.

Platinum: A Rarer Metal With Rarer Demand

There is a lot less platinum in the world than there is gold and silver, and this helps to keep the price high. The smaller the supply, the higher the potential price. What pushes platinum down as a commodity investment is its lack of industrial use and its low popularity among the public as a valuable metal. Though platinum is used in industry, primarily in the production of automotive catalytic converters, its use is limited and this keeps demand low relative to gold and silver.

There is demand for platinum for jewelry, but again this demand is much lower than for gold or silver. Do not let the high price of platinum fool you. The biggest driver of its price is its rarity, and if a large seam of platinum were to be discovered in a mine this would drastically reduce its value as there would suddenly be a lot more available. The supply would outstrip the demand and the spot price of platinum would tank across the world.

Platinum has higher risks related to its scarcity too. The few platinum mines in the world are situated in countries that are governmentally unstable. If the geopolitical situation changes in these countries it can have a huge impact on the price. The majority of the world’s platinum production is in South Africa and Russia, and both of these countries are subjected to internal turmoil as well as international sanctions or isolation. Geopolitics far beyond the control or influence of investors can have both positive and negative impacts on the price of platinum, making it far more potentially volatile than other precious metals.

Palladium: Waiting In The Wings

Gold, silver, and to a lesser extent platinum take center stage in the precious metal commodity markets. Palladium is often overlooked by investors or seen as the weaker precious metal of the group. It has a huge amount of potential, however, and uses for palladium by industry are steadily growing. Though it can be used in jewelry, dentistry, and in healthcare, it is primarily used in the manufacture of electronics and in the chemical industry.

Though it is a rarer metal, like platinum, there are many more mines across the world producing palladium which helps to make it more stable. There are palladium mines in countries like Russia, South Africa, and Zimbabwe which are more sensitive to geopolitical conditions, but huge mines also exist in more stable nations. The United States, Finland, Canada, and Australia all have large palladium deposits and working mines refining the metal for use in industry as well as purchase by private investors.

The short term future of palladium prices is a little clouded. Its primary industrial use is in the catalytic converters used by vehicles with an internal combustion engines to reduce emissions. Every government across the world is incentivizing the switch to electric vehicles which have a greatly reduced demand for palladium. It can be used in the manufacturing of solar panels and hydrogen fuel cells, but this level of demand will never equal the volume needed by auto manufacturers. If the demand for solar panels in particular spikes in the near future, the demand and price of palladium will increase dramatically. It could be a sensible long-term investment, but it is currently waiting for the opportunity to take center stage in investment portfolios.

Precious metals will always be in demand. They are versatile metals that can be used in many different ways, including as a way to protect wealth. Every investment portfolio should have a precious metal element as a hedge against market crashes and credit squeezes. The consistent demand and stable prices make them the perfect way to protect your wealth from market forces beyond your control.

Share on Facebook

Tweet

Follow us