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A Guide on How to Trade Precious Metals

Arto Laakso is a well-known advertising agency entrepreneur, best known for his multi-channel marketing communications skills.

Precious metals

Before you venture into precious metals trading, it is important to know how to buy and sell precious metals. Perhaps, the question that you need to start by asking is; what are precious metals? Precious metals are naturally occurring, rare metallic chemical elements whose economic value is very high. Precious mental are less reactive chemically. They include gold, platinum, silver and palladium.

Why Precious Metals? Why Now?

Tips on how to trade precious metals

Knowing how to invest in precious metals is very important because just like any other business adventure, your goal is to make profit. As such, you need to know tips on how to trade in precious metals to succeed in your business adventure.

Here are important tips to guide you in precious metals trading:

  • Know the amount of capital that you have to invest in precious metals business.
  • Know the asset outlook in question. This could bearish, bullish or neutral.
  • Determine whether you will focus on a single specialty or diversify in different assets like options, stocks or features.
  • Determine how long you intend to stay in a position.
  • Determine the point at which you will enter into a trade. Know the signals that you will use in determining the entry point.
  • Know the action to take if the price of the position that you take go down
  • Determine whether you will be doing hedging and if yes, know the type of hedge that is.
  • Determine the price level to tolerate before deciding to cut the losses if prices go down further.
  • Know the point at which you should cash out your profitable trades.

Precious metals have always had a place in the portfolios of savvy investors. This is because apart from offering special type of inflationary protection, precious metals do not carry credit risk and they have an intrinsic value. Investing in precious metals is a sure way of ensuring genuine insurance against political or financial upheavals.

How to buy precious metals?

Some people want to venture into precious metal trading but they do not know how to buy precious metals or where to buy precious metals. There are several ways to purchase precious metals. One of the easiest ways of buying precious metals is to buy jewelries. However, jewelries may not contain pure metals such as silver or gold. This implies that you will not have full protection against inflation.

Perhaps, the best way of buying precious metals is purchasing physical bullion. There are several bullion dealers making transactions through the internet. If you choose this route, it is advisable that you read testimonials and reviews on different bullion dealers before buying.

If you are still not certain on how to buy precious metals, you should consider coins as well. However, compared to bullion bars coins have a high demand. This is because they are a cheapest and popular way of owning pure silver or gold.

Where to buy precious metal?

After knowing how to buy precious metals, it is imperative that you know where to buy precious metals at a better price. There are many factors that you need to consider when determining the dealer or broker to buy precious metals from.

Here are some factors to help you determine where to buy precious metals:

  • Look for a dealer or broker who has been in precious metal business for at least three years.
  • Find a dealer who specializes in the futures that you are interested in.
  • Choose a dealer whose approach embraces technical analysis and fundamental analysis.
  • Go for a dealer who has satisfied clients and knowledge in precious metals trading.
  • Look for a dealer with a proven track record of excellent performance.

How to invest in precious metals – Risk management tools

Any business has a risk. Knowing important risk management tools is a crucial aspect of learning how to invest in precious metals. One of the most important tools for risk management in precious metal trading is conducting research to know what to buy and when to buy it. Also have some mony in liquid form to use when opportunities arise.

In addition, use stop-loss orders to keep the value of your portfolio intact. You should also use put options as a way of protecting your investment during bear markets or corrections.

Generally, precious metals offer an effective and a useful way of diversifying an investor’s portfolio. However, to succeed in this business you need to know how to trade precious metals before you jump in. Precious metals are highly volatile and if this volatility is not checked it will ruin an investor but when harnessed it helps in accumulating wealth.

Gold and Silver – The Traditional Materials for Coins

The demand for precious metals in the world has always been high. Gold and silver are the most rarely found metals that also come with a high economic value. The good news? It's easy and efficient to invest in these two precious metals these days.

When you are thinking of an incredible investment to make, a lot of things might come to mind. But have you ever thought of gold and silver investment? These precious metals have, over the years, earned respect as an incredible form of money.

People's perceptions about wearing silver and gold have changed over the years. Donning pieces of jewelry made from precious metals is not just a fashion statement. Traditionally, many cultures stored these metals for their long-lasting nature and wealth as they have unimaginable value compared to other metals.

You don't have to go through a daunting and expensive metallurgy extraction process to produce silver and gold. These metals come with outstanding characteristics that make them stand out in the industry. In essence, these features make them valuable coins or the most coveted treasure hunts. They include:

Soft and Ductile Elemental or Natural Form

Silver and gold are soft, ductile and malleable metals. This means that it's easy to work with these two precious metals. Even though the two metals are too soft in their elemental form, they can be alloyed with other metals to make them texturally sturdy and durable.

Silver and gold have been used for the production of coins which are widely used for trade. Once these metals are alloyed, they produce coins that are not affected by arduous day to day handling. And they don't tear and wear after extensive use. Hence, this is why coins have been used for trade for many decades.

Other features make gold and silver trade a worthwhile pursuit include:

  • They don't easily melt.
  • They shine stunningly and are appealing to the eyes.
  • They are not reactive, unlike other materials you will come across.
  • They are not radioactive, and you can use their products without any worries.

Investing in Gold and Silver

It is satisfying and rewarding to invest in gold and silver coins. It's amazing to go to a shop and come out carrying a bag of silver or gold coins. Some people may disapprove the idea of buying coins in this day and age.

However, this is not a crazy idea, as silver and gold have been an honored and cherished part of the traditional model of investment or trade. There is more than honoring this traditional form of trading and investment. Have a look:

1. Gold and silver have a tendency of increasing in value when other investments you may have in mind start to decline. When the rates of bonds, equity, and real estate markets tend to decline, investors will gather to buy these precious metals.

Silver and gold are assets that will maintain or increase in value. As an investor, you will have a stabilizing effect for your portfolio even during hard economic times.

2. Don't have to pay capital gains tax before you sell your gold or silver coins. When you invest in a car, buy a house or pursue certain investments, you will have to part with some tax.

3. No one has to know you have bought or sold gold or silver coins. This is a decision you can keep to yourself and enjoy the profits or the investment alone.

4. In the event of unexpected currency devaluation, you can use your silver and gold to buy or sell. You will not be the first one to do so. Many traders and precious metal collectors have done so. Take the opportunity of owning such coins and trade stress-free.

Buy Gold and Silver Coins Today

If you decide to buy or invest in yellow metal and silver coins, make sure you get them from reputed dealers or financial institutions. Ensure the gold or silver coins or jewelry you decide to buy are authentic. The prices of these coins also vary depending on whether you are looking for numismatic coins or bullion gold coins.

There are institutions that you can buy silver and gold coins from, and they keep them safe for you as an asset. You wouldn't want to risk losing your assets if you don't have a safe at home. So, if you are considering a rewarding way to invest, gold and silver coins are an excellent investment

How To Invest In Platinum

In today’s volatile markets, hedging your future by holding a variety of asset types is a must. Platinum is an attractive asset for many investors due to its value, scarcity and the ease with which it can be traded. Find out how you can join them and increase your net worth by investing in platinum through a variety of ways, including equity, ETFs, futures and physical coin.

Why Invest in Platinum?

Platinum is an exceedingly rare precious metal. While nearly 82 million troy ounces of gold are mined each year, only 5 million troy ounces of platinum can be excavated during that same period. Like other precious metals, there is a finite quantity of platinum available. Because supply cannot increase, your investment in platinum will keep its value over time. Platinum does not go bad and can be easily broken up to be resold in chunks. These properties make platinum an ideal store of value and an excellent investment.

Why is Platinum a Good Investment Now?

Various international developments have increased investor concerns about the long-term stability of fiat currencies. Whether or not you subscribe to those beliefs, diversifying your assets across multiple asset classes in order to reduce risk is a sound strategy. By carefully timing your entry and exit from the platinum market, you can take advantage of other investors and leverage their speculation to help you buy low and sell high.

Platinum’s value as a rare and precious metal is fairly fixed in relation to other goods. Should rapid inflation occur, platinum will hold its value and keep your portfolio safe.

Is Platinum Investment Better than Gold?

While platinum jewelery is becoming more and more popular, a large amount of the demand for platinum is from the automobile industry. Platinum is a key component of autocatalysts, an engine component that helps to lower a car’s emissions and is required by law in many countries. This sort of static industrial demand is absent from gold and silver and helps to establish a high price floor for platinum. When investing in platinum, your investment goes up in value as automobile production increases. This makes platinum an ideal investment in any sort of economy.

Platinum’s supply is very limited. Most platinum comes from a small number of mines in South Africa. The production from these mines is often interrupted by regional violence, union disputes or political problems. Because of this, platinum is prone to huge price spikes. If you invest in platinum, you can take advantage of these spikes to double your money — or more — in a relatively short time frame. Best of all, even if you miss the spikes or plan on investing more long-term, steady industrial demand makes platinum a safe investment over longer periods.

It is important to consider these price spikes when timing your entry into the platinum market. While you do not need to stay abreast of current developments as a long-term investor, it is necessary to know if a spike is occurring while you enter the market. If headlines show that turmoil in South Africa’s mining community is driving prices up, consider shorting platinum or delaying your investment until prices are more stable. If you wish, you can watch for future spikes and sell off part or all of your investment for a profit, or you can simply go long to hedge some of your other investment options.

Platinum Investment Options

While the safest way to hold platinum is to buy physical bars, this process is complicated, expensive and requires you to physically deliver to a buyer when it’s time to liquidate. Luckily, alternatives exist. Futures contracts remain a popular option for investors for investing in platinum without actually dealing with physical bars. ETFs and equity options allow even easier entry to the market.

Physical Platinum

Both platinum coins and bars have a very high value to density ratio. This makes it cheap to store and move compared to other assets. Investors can buy bullion or coins from reputable dealers and hang on to it until it’s time to sell. Physical platinum is not without its share of complications: investors must make sure bars meet various quality standards, and there may be a premium for buying coins or bullion. Physical platinum can be difficult to sell on short notice in some locales; be sure to research your local market before you buy.

Futures

Platinum futures are an option for investing in platinum without buying physical bars. Futures contracts are easy to trade on various commodity markets. While it’s possible to buy physical platinum with futures, most investors prefer the liquidity of futures contracts and choose to sell their contracts before they settle. Futures are tied more directly to the price of platinum than equity.

ETF

ETFs, or exchange-traded-funds, are securities traded on various markets that are tied to the value of platinum. Because transactions are handled through the stock market, purchasing ETFs is even easier than purchasing futures. While platinum ETFs are not as common as gold or silver ETFs, there are ETFs available to cover every region. Best of all, short ETFs make taking either market position simple.

While ETFs are very similar to platinum futures, bear in mind that they are not directly tied to physical platinum. Extreme pricing events may test the validity of ETFs and you may not be able to redeem them for the value you want. This should not be an issue for normal investing. If you are holding platinum as a hedge against a currency collapse or some other catastrophic event, however, you may wish to purchase physical platinum or futures instead.

Equity

Rather than investing directly in platinum, many investors choose to purchase stock in mining companies and platinum distributors. While these stocks are tied to the performance of the company, they still have a strong correlation with platinum trends and spot prices. Like ETFs, platinum equity is extremely easy to add to your portfolio.

Bear in mind that the value of your equity is tied to the performance of an individual corporation. This means that your equity can fluctuate in value independent of the platinum market. Be sure to research all available options and choose a company that meets the needs of your portfolio.

How To Invest In Palladium

Palladium is a rare, soft metal. While palladium is very similar to platinum, it has a lower melting point, is less dense, and is more useful in a number of industrial capacities. Palladium is only mined in a few places around the world, including South Africa, Montana, Ontario and Russia. Palladium has become a popular investment recently due to low supply and high industrial demand.

So Why Invest in Palladium?

Worldwide production of palladium is limited by its rarity. While stockpiles of palladium exist, their supplies are dwindling, leading many investors to believe that the value of palladium will rise sharply.

Palladium is a precious metal similar to gold, silver or platinum. It is used in jewelery for its white gold color and as a component in alloys. Unlike gold or silver, there is a large amount of industrial demand for palladium. Much of this demand comes from worldwide production of catalytic converters, which require palladium’s unique properties as a catalyst to function. Chemists have found new and innovative uses for palladium as recently as 2010, when new research into its properties won a Nobel Prize.

Palladium is additionally used as a component in consumer electronics. Palladium is a key component of multilayer ceramic capacitors and is used to plate connectors in many electronic devices. As demand for electronics continues to increase, the value of palladium is likely to go up.

Finally, palladium is used in the purification and storage of hydrogen. While fuel cell cars remain a distant glimmer on the horizon, hydrogen is an abundant element that has a variety of industrial uses. Should new technology or logistical capacity emerge and cause hydrogen fuel cells to become more prevalent, the price of palladium will skyrocket.

Is Now a Good Time for Palladium Investment?

In 2001, many investors turned to palladium due to speculation based on its industrial demand. When it reached highs of over $1,000 an ounce, the Russian government began to sell of a large stockpile of palladium it had accumulated during Soviet years, causing the price to drop. Since then, palladium has recovered almost all of its value, despite the sudden increase in supply. The Russian government cannot continue to offload 2 million ounces of palladium a year onto the market forever. When the stockpile runs dry, supply will collapse and palladium prices will begin a rapid upwards trend.

What Are My Options When Investing in Palladium?

Like other precious metals, there are a variety of ways to expose your portfolio to palladium. Investors can purchase bullion or coins, ETFs, futures or equity in palladium related companies. Because of the relative lack of liquidity of physical palladium coupled with high industrial demand, futures, ETFs and equity are better options than physical coins or bullion for most investors.

Learn How To Invest in Palladium

Physical Palladium

Palladium is available in bars as well as coins. Some countries have begun to impose assaying standards on palladium purposed for jewelery. Both China and Canada have palladium coins available to investors. There is low supply, demand and liquidity for physical palladium, meaning that you should make sure that you have a buyer lined up before risking your investment.

Futures Contracts

A futures contract is an agreement to purchase a certain amount of a commodity at a later date for a set price. Investors use the market for these contracts as a way to make money off of commodities without actually owning them. By selling the contracts before they settle, investors can make money off of price changes without having to deal with the logistics of moving physical palladium or lining up a buyer.

ETFs

Futures contracts remain daunting to some investors, leading to the creation of ETFs or exchange traded funds. These are stocks whose prices are tied to the value of a commodity rather than the performance of a company. ETFs can be purchased through a broker or on an exchange the same way that a regular stock can be purchased. At least two palladium ETFs exists at the time of this writing: ETFS Physical Palladium (PHPD on the London Stock Exchange) and ETFS Physical Palladium Shares on the New York Stock Exchange.

Equity

Rather than directly purchasing palladium or palladium futures, some investors prefer to invest in the companies surrounding the mining, transport and stockpiling of palladium. This practice operates in a similar way to buying an ETF: you buy stock, and the value of your stock is tied to the value of palladium. Unlike an ETF, however, these stocks are tied to the performance of an individual company and may suffer from price swings independent of the price of palladium. Do your research and be sure to choose the company that best fits your portfolio to purchase equity in.

Is Palladium Investing Safe?

Just like with any other investment, there are risks associated with investing in palladium. A sound strategy when investing is to manage the level of risk you are exposed to by holding a variety of assets and asset classes. You probably shouldn’t sell your house and buy physical palladium with the proceeds. Instead, develop a plan for entering the market, taking on an appropriate amount of risk and exiting the market when the time is right.

Palladium prices have been on an upward trend since the market crashed in 2001, despite the existence of a massive Soviet stockpile. Consumer demand for electronics continues to increase. The infrastructure needed to support fuel cell cars has been rolled out in a small number of cities worldwide. New industrial applications for palladium continue to be found. Because of these factors, demand for palladium will continue to increase. Palladium is an element; supply will not increase. It will not be economic to synthesize palladium from other materials in our lifetimes. With steadily increasing demand and limited supply, the price of palladium is certain to go up. Best of all, the industrial demand for palladium derives from safe, ubiquitous uses. There is little chance that the world will choose to stop using cars or iPads anytime soon. Because of this, palladium is a fairly safe investment that has a good chance of yeilding extremely large returns.

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This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2020 Arto Laakso