Metals are sometimes overlooked by traders when they’re considering assets they want to trade. But the potential for returns is real, if you take the time to understand the market first. So if you’re interested in trading metals online for profit but don’t know where to start, this article will give you an introduction to precious metals and highlight how you can trade them.
In the financial market, there are four main types of metals you can trade. These are ferrous, non-ferrous, noble, and heavy metals. Ferrous metals include iron and steel while non-ferrous metals include aluminum, lead and copper. Noble metals are also known as precious metals and include gold, platinum, and silver. Heavy metals include lead and arsenic.
There are four main precious metals that you can trade in the financial market today. These are gold, silver, platinum, and palladium. Gold is mostly used for investment purposes and it does not have any significant use. The other use is in jewelry making. Silver is used in the making of cutlery, mirrors, and coins. Platinum and palladium are used in the vehicle manufacturing industry. Their properties make them ideal for the manufacture of catalytic converters that help in the reduction of air pollution.
The first step in trading metals is to create an account with an online broker. The broker should have the metals you want available as tradable products on its platform. After this, you should make sure that you are proficient in technical and fundamental analysis. The former involves the use of indicators to analyze the movement of charts. The latter involves using the news and economic data to help you make decisions on the movements of the prices.
Because gold a combination of cosmetic and industrial uses, its fundamentals are different from other precious metals that are more affected by demand and supply issues. As mentioned before, gold is also used for investment purposes. It is hoarded by central banks and large hedge funds. Investors who buy gold do so with the expectations that they will be safe in case of a major disaster. Therefore, gold mostly trades depending on the movement of the US dollar. Historically, the price of gold has fallen when the value of the US dollar rises. Therefore, as a gold trader, you should pay a close attention to the macro issues that affect the dollar. For example, you should focus on economic data from the US.
On the other hand, the other metals are more industrial in nature. Therefore, they depend mostly on supply and demand and the general trend in the world economy. For example, when the economy is doing well, the expectation is that more people will buy cars. As they buy cars, the demand for platinum and palladium will rise, because these are used in the manufacturing process. The increase in demand will then take price higher. The same is true with silver.
It is also important to understand the supply of these metals. The world’s biggest producers of silver are Mexico, Peru, China, and Russia. The biggest suppliers of platinum and palladium are Russia, South Africa, Zimbabwe, and Canada. Knowing the sources of these metals will help you do your analysis in case of a geopolitical issue.
Additionally, you should pay close attention to fundamental data. Every week, the US Commodity Futures Trading Commission (CFTC) releases the Commitment of Traders report. This report shows how retail traders, commercial managers, and hedge funds are trading the metals. This report is released every Friday. You should also look at the reports from the World Gold Council (WGC), World Platinum Investment Council (WPIC), The Palladium Group. Finally, you should look at the reports of the biggest producers of the metals.