Entering the Silver and Gold Markets with Swagger

In the first few months of 2024, gold and silver prices were in extremely bullish mood. In April this year, gold actually managed to set a new price record, while silver almost topped its three-year peak. Analysts are struggling to understand the forces motivating the bull run because US interest rates are high and look set to remain so for the time being. High interest rates normally hold back gold prices because precious metals don’t yield interest. 

Apparently, it was large central bank purchases, coupled with simmering geopolitical risk that were behind the outsized price gains. Whenever the economic world becomes clouded by a sense of foreboding, (to which the conflicts in Ukraine and Israel have certainly contributed), traders turn to that ancient safe haven asset – gold – to preserve the value of their savings. Whatever the reasons for the recent price surges, they’ve been attracting lots of fresh interest to the precious metals market.

What are some of the ways you can trade in the prices of precious metals in our times? Are they all essentially means of hedging against economic uncertainty, or can you bullishly speculate on price changes in gold just as you would with other financial instruments? Finally, is it possible to benefit from bearish drops in gold prices? Join us for a minute or two to get some answers.

Methods of Silver and Gold Trading

In a certain way, people find it appealing to own gold and silver in their physical forms. Putting aside the inimitable glamour of gold jewelry, it lends you a sense of security to be able to touch and fondle your wealth with your own hands, rather than merely seeing the proof of its existence on a computer screen. However, it’s worth, at the least, giving this a second thought. If you choose to buy gold bullion bars, you will have to come up with a pretty secure way of storing them, and this may make for an ongoing cost. Plus, you’ll probably want to get them insured, which will add to your expenses.

One benefit of living in modern times is the opportunity to trade in precious metals as financial instruments. For a start, you can send your money into the stocks of companies that mine for gold. The values of these stocks tend to rise and fall with gold prices, so your money would gain exposure to the actual metal in a fairly direct way. 

A highly popular means of metals trading is made possible by funds like ETFs. These instruments hold the metals in storage for you, through which they attempt to track the underlying benchmark prices. Some ETFs hold the actual stock of mining firms, while others hold derivatives contracts like options and futures. This method of silver and gold trading gives you the advantage of liquidity: the ability to sell your assets, or buy more, without complication. 

An example of a gold mining ETF would be the iShares MSCI Global Miners ETF, which holds the stocks of established gold mining firms with names like Eldorado Gold Corp., Newmont, and Agnico Eagle Mines Ltd. The VanEck Junior Gold Miners UCITS ETF, by contrast, puts its funds into younger gold mining companies which, according to VanEck, “Typically… have a greater sensitivity to underlying gold price movements than more established, senior gold mining companies”. 

Gold Trading as CFDs

CFD trading opens up another channel for precious metals trading, and one whose appeal is progressively growing. From an online CFD trading platform, you can speculate directly in the price changes of your metal of choice, whether its silver, copper, palladium, or gold. Opening a CFD deal means you establish a contract with your brokerage stipulating that they should pay you in the event prices follow your prediction. You may, therefore, open a “sell” deal too, according to which your earnings would be preconditioned on falling – not rising – prices.

Since CFD trading allows you to speculate on the prices of various financial instruments – not just the commodities themselves – you could focus your CFD deal on gold or silver ETFs, if you prefer. In that case, whenever the value of that particular ETF moved as you forecasted, you would see fresh earnings. Those earnings would be calculated in proportion to your deal size, which is determined entirely by you.

CFD gold trading gives you the added benefit of being able to magnify your deal size with leverage. Thus, you would be able to take a $1,000 “buy” deal on gold and turn it into one worth as much as $400,000 (if you elected to use leverage of 400:1). In this case, a 2% surge in gold prices would yield you, not $20 (2% of $1,000), but $8,000 (2% of $400,000). Leverage is made possible through borrowing money from your brokerage, which implies you’ll have to repay that loan even if prices don’t go the way you hoped. You should, then, use this tool with caution to avoid outsized losses. 

Wrapping Up

Returning to the question of the economic environment in which gold prices find themselves at present, it’s worth noting that many economic indicators, including the yield curve (which tracks the returns of long-term US Treasury notes against short-term ones), “suggest a much higher risk of recession than big investors currently perceive”, in the words of Bloomberg in mid-June. This prospect may spell bullishness for gold – the old-time safe haven. 

Among the quality CFD brokerages you’ll find out there is iFOREX – a respected presence in online trading for over two decades. On the iFOREX app, you can trade in the price movements of hundreds of financial instruments – from commodities to shares to ETFs and more – from the comfort of a single platform. Visit the iFOREX website to find out more about the company and the powerful trading tools enjoyed by their clients.