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Trading Precious Metals Futures

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The precious metals have been some of the most popular commodities to trade since the 1970s. Gold, silver, platinum and palladium tend to generate the most interest from investors during times of high inflation, political turmoil or economic distress. Gold is usually the most active of the complex, but silver can be very active and volatile at times. Platinum and palladium usually have much less activity.

The precious metals are one of the few commodities where investors can easily buy the physical commodity as an investment. Gold and silver are minted as coins and can be bought at almost and coin shop or on eBay. Gold coins are typically minted in 1 oz coins, but some coins are as low as 1/10th of an ounce. There are also a wide range of sizes of bullion bars that you can buy in all the metals.

Trading Gold

Gold is the “go to” metal in times of political or economic turmoil. Most investors flock to gold as a safe haven investment. Many of the moves are short-lived in gold after a news event happens around the world. Gold probably won’t have a sustained move unless the event appears that it will last a prolonged period of time.

The valuation of the U.S. dollar often sets the tone for the price of gold. A stronger dollar puts pressure on the price of gold. In times of turmoil, many investors flock to the dollar and gold at the same time. Sometimes gold can sustain the pressure of the dollar, but many times gains will be limited if the value of the dollar increases substantially.

It is better to look at the longer perspective when you try to measure the influence of the dollar over gold. The value of the dollar will typically drop during times of increasing inflation. The influence is hard to see on a daily basis, but it is very apparent when you examine from a long term outlook.

Gold tends to alternate from periods of low volatility to periods of high volatility. The same can be said for many commodities, but gold is more influenced from political and economic events than most other commodities. Some of the best trades in gold come from waiting for a breakout higher after gold has been stagnant.

Traders often have to be very nimble when it comes to trading gold. The market is notorious for having quick spikes higher and then drifting lower. This often happens after a political or economic event. When people hear the headlines, it always seems like the problem or threat will last longer than it does. Gold will often spike higher initially and then fall back down. A lot of suckers get caught holding on too long. Sometimes, gold will have a prolonged move higher from the event, but the price of gold usually falls well before the threat has passed.

Trading Silver

The price of silver usually moves very closely with the price of gold. Sometimes silver gets more volatile than gold as many speculators feel there is more leverage with silver. You can also watch the spread between gold and silver. If it stretches too far from the historic norm, the market will likely come back in line. This often presents good trading opportunities.

Silver is also an industrial metal. Therefore, the price will fluctuate with economic activity. Gold is considered more of a reserve currency and safe haven investment than silver, but silver is a more well rounded investment.

Trading Platinum and Palladium

Platinum and palladium are often over shadowed by gold and silver. Trading volume is much less than silver and gold. Both of these metals are used for industrial purposes like catalytic converters, but platinum is also used to mint coins.

A large portion of platinum is produced in Africa. Platinum mines in this area are notorious for having labor problems as well as power outages. Believe it or not, many mines to this day have problems getting adequate power to operate their mines. The price of platinum typically rises on news of major power delays and labor strikes.

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