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Forex Brokers Offering Metals (Gold, Silver, etc)

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Changes in the global economic system have thrown up exciting trading opportunities in several asset classes. Precious metals are one of these asset classes producing incredible trading opportunities. This is why you should consider trading these metal assets on forex brokers' platforms offering metal trading.

CFD trading on metal assets is growing in popularity because their fundamentals are playing out currently in the post-COVID global economy. The price volatility of metal assets driven by global inflation dynamics and the countermoves made by the world's central banks are pure heaven for a metal trader. Metals are, by nature, not subject to the same dynamics as forex pairs or energy assets. It is essential to understand what drives metal prices and the specifications behind the contracts that are presented by the forex brokers offering metal trading. This page provides this information in a nutshell.

Metal Trading and Metal Assets

CFD metal trading is the trading of contracts based on the prices of the underlying assets that constitute the precious metals/ores extracted from the ground. Metals are extracted commodities, and the metals in question are as follows:

  1. Gold (XAU/USD)
  2. Silver (XAG/USD)
  3. Copper (XCU/USD)
  4. Platinum (XPT/USD)
  5. Palladium (XPD/USD)

You will likely find gold and silver as an everyday staple on forex brokers offering metal trading. Copper, platinum and palladium may not feature that regularly on forex platforms. The symbols of these five metals traded as CFDs on forex platforms are derived from the two letters of their chemical symbols. So bringing these brokers to your doorstep is a bonus. So what are these assets all about, and how are they traded?

A) Gold

Gold has been used as a currency throughout history (until the advent of notes and coins). It is also a hedge against inflation because it stores value. As far as CFD trading is concerned, gold prices are most sensitive to changes in inflation and to moves made by central banks to counter inflation via adjustments in interest rates. Gold is also sensitive to bond yields. Bond yields refer to the interest that bond market instruments offer investors. Those who buy into government debt will get a rate of return relative to the yield, which in turn is dependent on the national interest rate. When there is an expectation that interest rates will, bond yields tend to rise and will pull investment flows away from gold. This is because gold does not attract an interest yield.

The reverse is also the same. Expectations of lower interest rates will reduce bond yields and promote the entry of investment money into gold, thus raising its price. Gold is also susceptible to price variations whenever there is upheaval in the global economy or in risky assets (stocks). Investors tend to rush their money into gold to preserve its value when risky assets such as stocks and energy assets experience a price slump. That is why gold is both a store of value and a safe-haven asset.

B) Silver

Even though silver was used as currency in historical times, it is more applicable today as an industrial metal used in many products of the technology sector, such as computers, electric cars, mobile phones, computers and the pharmaceutical industry. Silver prices have a weak correlation with gold. Silver prices are more sensitive to industrial production data from the top consuming countries such as China.

C) Copper

Copper is another industrial metal which is obtained in the most significant amounts from South America. China is the world's largest importer of copper, and it imports this metal from Peru, Chile and Australia. The price of copper is determined by the demand and supply dynamics emanating from the net exporters and importers. These dynamics come in the form of mining issues (strikes, shutdowns, COVID) and China's GDP and industrial production and manufacturing PMI data.

D) Platinum and Palladium

These are industrial metals which are very rare and are used in the tech and electrical vehicle (EV) industries.

Who are the Forex Brokers Offering Metal Trading?

The forex brokers offering metal trading allow traders to trade gold, silver, copper and/or platinum and palladium as CFD products. You do not get to buy or sell the physical product. Instead, the trades are made based on contracts that track the underlying metal assets' price changes. The London Mercantile Exchange (LME) provides the biggest settlement venue. However, various exchanges all over the world handle the trading of metals. NYMEX, COMEX, and the Shanghai Futures Exchange are other trading venues for trading metal assets.

Metal prices are derived from the prices obtainable on the physical trading floors of these exchanges. You need to understand the contract specifications for the assets. Most importantly, you must know how each asset's pricing style. You should also be at home with a tick move's value concerning a particular lot size.

  1. Price Quotes
  2. Monetary Value/Pip
  3. Minimum Contract Size
  4. Leverage and Margin Requirements

Price quotes for metals feature two decimal places for gold, platinum, copper and palladium. For silver, the price quotes are set to three decimal places. The minimum trade size is also different for each metal asset. For gold, a mini-lot (0.1 Lots) is valued at $1 per pip, while the same trade size for silver is valued at $0.1 per pip. For copper, this value stands at $0.125. Different brokers will give you their tick values for different lot sizes.

Trading with Forex Brokers Offering Metal Trading: What You Gain

What do you stand to gain when trading with forex brokers offering metal trading?

  1. Gold and silver are more volatile than forex pairs but have a more predictable pattern than crude oil or natural gas. This provides access to trading opportunities that can be more profitable than forex trading if the trades end up in the green territory.
  2. The fundamentals governing the metal markets are well known and very predictable. Perhaps even more predictable than energy or forex trading.
  3. The metal assets also have correlations, usually based on the producer-consumer market dynamics. For instance, you can use China's manufacturing production data to predict copper, palladium or silver prices and inflation and interest rate expectations to trade gold.

Best Practices When Using Forex Brokers Offering Metal Trading

Metal trading has the potential for good rewards when profitable, but there are precautions to take to ensure you are profitable. Metals tend to have wide intraday ranges, so price movements can sometimes get wild and out of control.

A) Apply Risk Management

Metal assets are volatile and have a wide range of movement. Therefore, you need to apply sound risk management to your trades.

B) Understand the Fundamentals Behind metal Prices

The technicals will always be subject to the fundamentals. A candlestick will not explain a mining strike in Peru on the charts, except they both align in the same direction. You must know what moves metal prices before you trade them. The fundamentals for each one are different from the others.

  • Know the top 2 producer nations for gold, silver, copper, platinum and palladium.
  • Know who the top consuming nations (and top importers) are.
  • Are there any strikes or disruptions in supply in the top producing nations?
  • Is anything happening within the net importing countries that will affect demand?
  • Is there flooding or closure of a major mine?
  • Is there conflict in the producing or consuming nations?
  • Manufacturing PMI, Industrial production and GDP data of China (silver, copper, platinum and palladium).

These are the major triggers for metal trading. You will find them useful when plying your trade on the platforms of the forex brokers offering metal trading.

C) Maintain a Well-Funded Account

Volatile assets require well-funded accounts to handle the vagaries and drawdowns of metal prices. These are not assets you trade with a few hundred dollars. You need serious money to trade. Do well to fund your account adequately so you can handle the price ranges.

Conclusion

Now that you know what to expect when you use the platforms of forex brokers offering metal trading, you can scroll through our broker list below and get involved with metal trading today. These are exciting times for metal traders, and you should not be left out.