Precious Metals

Trade precious metals such as Gold, Silver, and Platinum with fast execution, low-cost pricing models, and flexible leverage options with no commission. Precious metals provide a useful avenue for trading strategy diversification and are considered as safe havens during times of market turmoil.

Why Are Metals Important?

Precious Metals are rare, naturally occurring metallic elements with high economic value. They are unusual in that they are both industrial elements and investments.

Manufacturers use these metals to make electronic components, jewelry, dental equipment and catalytic converters among other things. Investors, on the other hand, collect coins and bars made out of precious metals.

This second use – as investments – makes precious metals the objects of intense speculation in commodity markets. Precious metals traders see these commodities as a form of money that holds its value better than printed paper money.

Skeptics, however, argue that precious metals are simply rocks with little utility beyond their limited industrial uses. Ironically, the high premium placed on precious metals by traders makes them too expensive and impractical for most industrial applications. The precious metals with active commodities markets include the following:

Gold

Gold is the main precious metal utilized by speculators as an investment vehicle. Although manufacturers use the metal in some electronics parts, the vast majority of gold demand derives from jewelry manufacturers and traders. Many consumers see gold jewelry as a form of investment. Read our Guide to Gold here.

Silver

Manufacturers also use silver in both electronics and jewelry, while traders collect the metal in the form of coins or bars. Silver has historically traded at a fraction of the price of gold. Some traders track and trade the spread between gold and silver prices.

Platinum

Part of a group of six metals known as platinum group metals (PGMs), platinum is used to make jewelry and catalytic converters for cars. Investors purchase platinum for many of the same reasons they buy gold and silver. See our Platinum Guide for more information.

What are the Main Global Metals Trends?

Several long-term trends could create investment opportunities in metals over the next two decades:

Chinese Demand

As with most commodities, the Chinese economy plays an enormous role in determining metals prices. China still requires massive infrastructure to industrialise and urbanise its economy. As China builds this infrastructure, metals of all kinds will play a key role. Market participants should monitor how China manages its resource needs and economy in the years ahead.

Technological Innovation

The mining industry has faced tremendous financial challenges in the recent past. Many mining companies simply can’t extract and process minerals at a cost that allows them to make a profit. While depressed prices for some metals may be one reason, a bigger problem is the high cost of mining. One way mining companies are confronting this challenge is through investments in technology. Automated excavation equipment, electric vehicles, X-ray diffraction and sensor-based sorting of minerals are some of the new technologies that could transform the industry into a more profitable sector for traders.

Environmental Regulations

The mining industry faces intense global scrutiny for the environmental footprint it leaves. Many mining practices contribute to contaminated groundwater, loss of biodiversity, land erosion, destruction of crops and other problems. Most countries are now taking these problems very seriously. In China, for example, crackdowns on environmental pollution have caused the shutdowns of more than half of the lead and zinc mines in parts of the country.

Population Growth

Increases in the world population and demographic shifts could create investment opportunities in metals. The World Economic Forum estimates that the number of people living in cities could reach 6.4 billion by 2050. This urbanisation trend should create enormous demand for metals as cities build their infrastructure. However, the location of mines is likely to be far away from cities and, in many cases, in poor underdeveloped regions of the world. This dichotomy could produce huge supply/demand imbalances in metals markets. Solving these logistical problems could be a profitable venture.

BRICS Countries Chinese Demand

The five BRICS countries – Brazil, Russia, India, China and South Africa – are becoming increasingly dominant players in the metals and mining industry. The total market value of mining assets in these countries exceeds $1 trillion. Recently China’s state-owned gold mining company formed an investment fund with a Russian-controlled investment entity. If cooperative alliances such as this one become the norm in the future, then a small handful of entities could wield tremendous power over metals markets. On the other hand, if the BRICS countries continue to compete with one another, then the current market structure would remain intact.