Client LoginPrecious metals are valuable, naturally occurring elements that serve a dual purpose: they are both industrial commodities and investment assets.
Industrially, they are used to manufacture everything from electronic components and jewelry to dental equipment. As investments, they are traded on commodity markets as coins, bars, and futures contracts.
This dual identity is central to their value. Traders often view precious metals as a form of money that holds its value better than traditional currencies, particularly during times of economic uncertainty. However, their high value often makes them too costly for many industrial uses, leading to a strong focus on their investment potential.
There are several ways to trade precious metals without the need to physically hold them.
Metal CFDs (Contracts for Difference): This method allows you to speculate on price movements without owning the physical asset. It provides several benefits:
- Leverage: Increase your market exposure with less capital.
- Short & Long Positions: Profit from both rising and falling markets.
- Reduced Risk: Avoid storage costs and the risk of theft associated with physical metals.
Exchange-Traded Funds (ETFs): ETFs offer another popular and accessible way to invest in precious metals and other commodities.
Supply and Demand
Just like any other product, the prices of precious metals are governed by the laws of supply and demand. A shortage in supply, a surge in demand, or a disruption in production will cause prices to rise. Conversely, factors like improved extraction technology that lead to a market surplus can decrease their value.
Economic and Political Instability
Economic and political instability can have a significant impact on precious metal prices. Market conditions, including currency fluctuations, directly influence these prices. Precious metals are traditionally negatively correlated with the US dollar, making them a valuable hedging tool during periods of economic or political uncertainty and unexpected global events. When the dollar weakens, precious metals often become more appealing as a store of value, which can drive their prices up.
Regulation and Economic Decisions
Anything that dilutes the value of a currency results in an increase in precious metal prices. This is the case with quantitative easing (printing additional money) and higher rates of inflation. As metals are considered an alternate investment to the cash rate provided by financial institutions, their value generally decreases when interest rates rise.
Are Precious Metals a Good Investment?
Precious metals are a unique asset class because they offer intrinsic value, protection against inflation, and a safe-haven status. When used to judiciously diversify a portfolio, precious metals can help reduce both volatility and risk.
Trade Precious Metals with a Provider Invested in Your Success
Open a Dolphin Markets trading account today and join millions of others worldwide on our user-friendly platform. Go long or short with competitive spreads on indices, forex, gold, commodities, and more.
GROSS PROFIT
$190,205 – $189,955 = $250
GROSS LOSS
$189,705 – $189,955 = -$250