How to Successfully Invest in Precious Metals

Olymp Trade Team

What is Metal Investing?

Metal Investing is a type of asset investment that operates alongside currencies, stocks, indices, commodities, crypto, and other categories of investment options. There are many ways to invest in precious metals without directly buying gold bullion. Moreover, modern economics allows you to do without directly buying gold bullion and earn only on price fluctuations. For example, trading on the Olymp Trade platform is a great opportunity to earn on the quotations of precious metals.

Investment in precious metals is a great way to diversify your investment portfolio and maintain balance against the impacts of inflation.

However, these metals have unique pros and cons and seasons of highs and lows on an individual plane. Let's explore two key metal assets.

The Uniqueness of the Top Two Metals

Gold

 Gold is the most recognized metal asset. It stands out because of its heat and electricity conductivity, durability, and malleability. Beyond aesthetics and its status as a medium of exchange and store of value, gold has functional applications in several industries.

Key characteristics:

• Gold serves as a safe-haven investment option. It strikes a good balance between value and volatility.
• It is tangible and portable.
• It is a stable store of value when banks and inflation rates remain unstable.
• It is traded based on sentiments, and this increases its rate of volatility and unpredictability.

Silver

 Silver is a more dynamic precious metal when compared to gold. It derives value from functioning as a store of value and as an industrial metal. Both roles drag the metal in different directions leading to a high rate of price fluctuations. As a store of value, holders want to keep silver, but it must be in circulation as a primary industrial metal. These different demand patterns set the market up for volatility.

Key characteristics:

• It has great utility as an industrial metal. Hence, it will continue to be in demand.
• It is highly volatile.
• There is a positive correlation with the price of gold, that is, silver goes up in price when gold goes up.

Efficient Ways to Profit Investing in Gold and Silver

There are several ways to generate income from gold and silver. Some of them are related to investing directly in the assets. In this case, investors buy an asset, hold it, and can sell it when it increases up in value. For example, you can buy gold or silver bars and coins themselves (bullion), a document proving ownership of such bars and coins (certificates), or stock in precious metal mining companies linked to metal price movements.

Direct investments issues:

• Not everyone can buy gold bullion or shares in a gold mining company.
• Authenticity of the metal and storage of it. A real gold bar might be inconvenient to store under your bed.
• Identifying the right moment to take profits. One should sell the asset when it increases in value, but selling too early might eliminate more profit in the future.

The alternative way of profiting from gold and silver is trading. Instead of directly purchasing an asset, one profits from its price fluctuation.

Here are some reasons why this approach may be more advantageous:

• By doing so, you significantly lower the threshold for entering the market.
• Profit doesn’t depend on an increase in the asset’s value but on a correct forecast of the direction of the price. Thus, you can profit from a drop in the value of a precious metal.

Next, we’ll show you how to start trading gold and silver right now.

Trading Gold and Silver on Olymp Trade

The Olymp Trade platform has two trading modes that allow you to earn on the fluctuations of quotes without buying the asset itself. The minimum trade size is $1. In both cases, you can open transactions not only on the rise in the value of precious metals (long position) but also on the decline (short position).

For example, in FTT mode, you can get up to 92% of your income by correctly forecasting the direction of quotes. Please note: in this mode, you have one more precious metal available to you -  Platinum.

In addition, FTT mode gives you access to trades in the over-the-counter (OTC) market. OTC markets allow you to trade  Gold OTC on weekends when traditional metal trading is closed.

In Forex mode, you can profit depending on how far the quotes have gone in the direction you forecasted. Here, you are also allowed to use multipliers that increase your investment in a trade.

For example, the minimum multiplier for gold and silver is x20, and the maximum is x50. That means investing $100 in trade will give you a profit as if you had invested $2000 or $5000 respectively. In case of a wrong forecast, your losses will not exceed the amount of your investment.

If you’re thinking about investing in precious metals, you now know what to do – trade gold and silver on the Olymp Trade platform. Now, let’s discuss when to trade ⌚

Maximizing Profits Trading Gold and Silver

Trading allows you to profit from even the most insignificant fluctuations in exchange rates. Strictly speaking, you can hit your jackpot on gold and silver trading at any given time. Proper preparation is the key to success.

All you need is to keep abreast of the situation in world markets and learn to forecast the movement of quotations. Fundamental analysis will help you understand the state of the market and adjust for future trends. Technical analysis will tell you when to open transactions. You can read more about it using relevant tags on the Olymp Trade Blog.

Do not forget about volatility. The world markets regularly experience  ups and  downs, and you should be prepared for them. Some price movements are seasonal. Several years ago, researchers summarized gold trading data from 1975 to 2013 and concluded that March was the best month to buy gold. In the first half of the year, prices for the precious metal were gradually falling, and in the second half, they rose progressively. But is it all so simple?

You can see in the chart below that the "Cheap March" pattern did not work until 2020-2021, and this year it was in March that prices for the metal peaked. So what's going on?

The world markets are influenced by many factors including economic crises, technological breakthroughs, and geopolitical tensions.

In a crisis, gold usually goes up in price. It is a haven for investors losing confidence in traditional assets. As the situation normalizes, demand for gold falls. The more serious the crisis, the more market seasonality is disrupted.

For silver, analysts have also developed a similar pattern associated with the usual beginning of a rally on world exchanges. It is advisable to buy silver in the middle of March, in the middle of June, and in the middle of October. However, economic issues make adjustments here as well. The high volatility of silver also complicates the situation.

Deciding when to open a long position and when to open a short one is tricky. Fortunately, we have many other tools besides long-term forecasts. In a situation of any uncertainty, don't forget the news. It will provide clues on the direction markets are likely to turn.

The Olymp Trade platform regularly sends traders Insights, which are trading ideas from our experts based on current economic news.

Conclusion

Precious metal investment is a juicy option if you're looking to diversify your portfolio and introduce some balance. Olymp Trade is a great platform to give metal trading a shot. Our platform is perfect for beginners and expert traders as it is easy to use and has a rich library of resources and tools. Try out all the features of the platform!

Risk warning: The contents of this article do not constitute investment advice, and you bear sole responsibility for your trading activity and/or trading results.