How to trade precious metals such as gold
Trading with CFDs does not necessarily mean that the trader is dependent only on trading currency pairs, although they are undoubtedly among the most popular in this market. CFD contracts with precious metals are also an increasingly popular trading instrument. When it comes to precious metals, most of us will certainly think of metals such as gold or silver. But make no mistake, there are other much more lucrative metals that are also part of our CFD offer, for example, palladium and platinum. And it is this article that could serve as a stepping stone for all of you who are considering trading in precious metals but lack the basic information.
Inflation - The foundations on which it all stands
The value of precious metals is based on monetary policy and related inflation. This is because the value of precious metals simply tends to increase in an inflationary environment. The reason is simple. While the amount of precious metals on our planet is limited, fiat currencies are regularly reissued (printed), which reduces their purchasing power and, on the other hand, increases the price of precious metals over time.
Why trade CFDs and not futures?
CFD contracts are much more affordable because they can be divided into smaller units. For example, when trading gold on the futures market, the margin requirements for one whole contract are in the thousands of USD and this unit, of course, cannot be divided. So it is either everything or nothing. In contrast, in the case of CFDs, it is commonly possible to purchase volumes that are often more affordable to a trader with smaller available capital.
The importance of the currencies for which precious metals are purchased
Most traders would undoubtedly say that when it comes to trading precious metals, the “go-to” currency is the US dollar. The fact remains, however, that in the end it does not matter in which currency precious metals are bought, but a much more important question is when is the right time to buy them.The most appropriate period for purchases is generally considered to be the period of uncertainty and the times when the value of the currencies for which precious metals are purchased is quite low in relation to them. After all, it is better to buy at a time when, for example, the price of gold has fallen and there is a higher growth potential than when its value is at historical highs.