Since ancient times, gold and silver have always been highly appraised by humans. Today, in the context of financial trading, these precious metals are a great means to diversifying an investor’s portfolio.
There are many ways to sink your teeth into precious metals such as gold, silver, and platinum, which investors all over the globe find so appealing.
There’s no denying that gold is the most valuable metal out of all the precious metals in this list. Gold has been sought after ever since the early times for its alluring luster. Today it is used in a wide array of fields such as electronics as it is a great conductor of heat and electricity; dentistry due to its durability; and jewelry making for its malleability.
The price of gold is set by the markets 24 hours a day. The price isn’t much affected by the law of supply and demand due to the fact that the supply that comes from mining is significantly less than the gold hoarded above ground. The price of gold goes down only when hoarders feel like selling their gold and goes up when they want to buy the commodity.
The demand for gold increases in times of financial or political crisis, while usually the price of currencies, such as the U.S. dollar, declines. That is why, gold is considered a safe haven asset.
Silver is different from Gold due to its tendency for volatility. Silver is often highly volatile because it switches back and forth between its perceived role as a store of value and its tangible role as an industrial metal: It was once used in photography in the form of a silver-based photographic films. These are now overshadowed by the age of digital cameras. Today, silver is used in batteries, superconductors and microcircuits.
Accordingly, even though silver is sometimes hoarded just like gold, the demand for the metal is a force strong enough to affect price.
Much like the two precious metals mentioned above, platinum is traded 24 hours a day in the commodity markets. Because platinum is so rare, its price is higher than that of gold. Unlike gold, it is sought after in times of economic and geo-political stability.
Platinum is an important industrial metal much like silver. Platinum is mostly used as an automotive catalyst that lessens the damage caused by emissions.
Precious metals are usually traded in the following ways:
- Exchange-Traded Funds: All the metals mentioned above are available in the form of Exchange-Traded Funds which are an easy way of buying and selling gold, silver or platinum.
- Mutual Funds: Investors who are unsure of how to go about with buying metals should opt for mutual funds with managers that have good track record.
- Futures and Options: The futures and options markets are very liquid. They give investors the ability to use leverage in every transaction. Investors may lose just as much as they may win when dealing with futures and options.