What are precious metals?
In the Forex market, it’s gold, silver. Gold is obviously the most attractive and the most traded one. However, the other ones, especially silver, showed that they can be very volatile, too, and hence, provide a lot of trading opportunities. Potentially, including precious metals into your portfolio may not only diversity it but increase its long-term profitability.
How to trade metals?
There are certain factors that make trading precious metals and specifically gold very attractive. The main one is the fundamental predictability of the gold price based on its inversed relation to the global economic trends. If things go bad, investors seek refuge in gold – and its price rises. If the global economy is booming and optimistic moods are pushing traders to risk more – gold will normally slide down. That’s exactly why the virus crisis of 2020 made gold reach all-time highs above $2000!
What are the benefits of trading precious metals?
Precious metals are widely considered a safe haven asset, hedge against inflation, and portfolio diversifier. With a higher level of liquidity, they also provide many beneficial trading opportunities, especially during times of economic uncertainty.
How to start trading?
If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.
Gold, silver and platinum, known as precious metals, are efficient tools to diversify your trading to reduce risks. Moreover, these metals, especially gold, are safe-heaven assets in time of economic uncertainty. As a rule, precious metal prices go up if there is a recession and drop if the economic conditions get better. However, the reality is more complicated than that, so it’s necessary to rely not only on news and economic releases, but also on price charts and technical analysis.
Let’s start with the gold or XAU (trading acronym). Here are some winning strategies for you.
First, there is one simple concept: you should stick with the direction of a longer-term trend. For instance, at the chart below you can see that despite some corrections to the downside, i.e. declines, the price still follows the upward trend. If you see a bullish reversal pattern close to the support line, consider opening a buy trade.
Secondly, look precisely at the breakouts of the key levels. If XAU/USD breaks through a resistance line, it will keep going up aggressively. Just join the move! If it’s bullish, you can just put a stop loss on recent lows and a take profit on recent highs to protect yourself.
Finally, manage your risks properly. Keep your lot size within reason relative to your account size. It will help you preserve your trading capital to continue trading for the long term. Successful investing in precious metals is one of the areas traders should focus on.
Let’s talk about silver. It’s not as valuable as gold. Also, silver is not only considered as a store of value, but also as an industrial metal. That’s why, price fluctuations in the silver market are more volatile than in the gold one. However, if we compare silver and gold charts, we will definitely notice that they roughly trade in line.
The difference is that silver is affected not only by investment demand, but also by industrial demand or supply. It is used hugely in the photography, electronic and medical industries.
The rarest metal among these three precious metals is platinum. Like silver, platinum is an industrial metal. It’s mainly used for auto industry and jewelry. Chemical and the computer industries use up the rest. Africa and Russia are the main producers of platinum. This creates greater potential for cartel-like action that would support or even artificially raise platinum prices. That’s why it’s the most volatile precious metal, but you can use precious metals’ volatility to gain from it.
FBS team prepares weekly gold market analysis and trading strategies to keep traders informed about the most promising trade opportunities.
2023-02-27 • Updated