Is it Still Smart to Trade in Precious Metals?

Is precious metal trading still traders’ choice? People have been putting value on precious metals since the beginning of time. The price of gold was $35 per ounce in 1971. If you adjust for inflation, that’s equivalent to $295.86 per ounce today. But even with such high values, are precious metals still a smart investment? With inflation rates rising steadily, it can be appealing to invest in gold and online metals trading in general. Read on to find out why you should include gold and other precious metals in your investment portfolio.

History of gold & performance during inflation

It’s difficult to determine exactly when gold became such a valuable commodity. There’s evidence of gold being in use in the pre-dynastic age in Egypt, dating back to 5,000 BCE. Gold has been a part of many cultures and used for jewellery, the creation of plates for use in inscriptions, different art forms, and many other uses. This still continues today, and more and more traders get to trade gold online.

Gold has a strong track record of performing well during times of inflation. Investors who held gold during the 1970’s inflationary period saw their gold mining stocks increase greatly in value. People generally tend to turn to gold when other investments lose value during difficult economic periods.

Even though gold can lose some value, the loss is minimal. The expectation is that it will recover and begin to steadily increase in value again. That’s why investors tend to hold onto gold investments for the long term.

Diversify a portfolio with gold

Diversification is key to successful investing. Focusing too much on one financial asset means that losses in that type cannot be offset by increases in value by other assets. For this reason, it’s essential to diversify and invest in a combination of financial assets to avoid incurring serious losses.

This is where including precious metals can make a difference. If one or more assets loses value, there will probably be a corresponding increase in gold value that offsets it. Thus, you will be in a better position to hold onto those assets until they start to increase in value and begin generating returns. Traders use the best online trading platform, the MT4 to execute their trades.

Trading in silver

Precious metals like silver are one of the earliest traded assets which have long been an alternative to traditional investments such as stocks and bonds. In online metal trading, just like gold, silver is a valuable investment option and is often used for coins, bars and jewellery. Silver also has many unique technical, industrial and medical uses. Less than 10% of the gold mined is used in industry whereas more than 50% of silver is for industrial use.

Investors trade silver online for many reasons, but many see it as a store of value in uncertain times, while others see silver and other precious metals as a protection against inflation.

Silver is more accessible to investors

Silver is a precious metal with a lot in common with gold, but the prices of the two metals are very different. Many investors use the ‘gold-silver ratio’ to compare how prices are performing relative to one another. However, despite the many uses for silver, its price has never achieved more than 10% of the value of gold. On the plus side, the low price of silver means that it is much more accessible than gold so many traders choose to start their precious metal investment with silver.

As with other precious metals, there are different ways to invest in silver. For individual investors, the buying options include buying physical silver (or bullion) and trading in silver securities, such as stocks, funds, and exchange-traded funds (ETFs).

Is silver a good investment?

Investors choose silver for many of the same reasons that they choose gold and precious metals. Let’s consider some of the most important reasons:

• Returns. Over certain periods of time, silver has outperformed highly regarded asset classes such as stocks.
• A store of value. Silver can keep its value and even gain over time, providing a way for investors to generate profits.
• Hedging. Silver can act as a hedge against inflation. Historically, both gold and silver have made gains when US inflation is rising. Both silver and gold are valued in US dollars, so when the dollar decreases in value, gold and silver increase because they become less expensive to buy using other currencies.
• Liquidity. Silver is generally a liquid market, and if you’re buying certain kinds of silver assets, they’re highly liquid.
• Diversification. Adding silver to your portfolio is a way of diversifying your portfolio. Silver doesn’t produce cash flow like a business, so if you are looking to profit you have to rely on other buyers paying more for the precious metal than you did. In contrast, business owners can profit from the rising price of the commodity or the increased earnings of the business.

Should you trade in precious metals?

Gold is not just a good investment during periods of economic decline. There is sufficient historical evidence that gold is also helpful in withstanding periods of political instability. It’s considered a safe haven when the political climate is disruptive.

Silver is a good investment asset to have as part of a balanced portfolio​. It has some of the highest liquidity in the commodity markets and has increased in value over time. If you want to gain access to the silver markets, both physical bullion and ETFs have advantages and disadvantages. As with all financial assets, investing in and trading in silver comes with risks of losing capital.

Traders get to trade CFDs on gold & silver for the reasons mentioned above and for many more. It’s important to remember that trading is risky, and it’s up to you to decide how you should spend your money. Nonetheless, investment is one of the great paths to financial independence, and in some cases, your path might be paved with gold.