Wednesday, March 21, 2018

Spot Metals in Trading

To be a successful trader, you must have a competitive edge that separates you from other traders. Along with skills and education, experience is key when it comes to trading.

Many traders expand and diversify their portfolio by trading spot metals.

The more assets you have under your belt, the more your competitive advantage is increased. It is also important to know your trading objectives and risk profile before jumping into the world of spot metal trading.

Gold and silver are two of the most commonly traded commodities in the world. Similar to trading currency pairs, traders take long or short positions in gold or silver while at the same time, taking the opposite position in the US Dollar.

Trading spot metals involves speculating price movements of gold or silver in relation to the US Dollar.

Spot metals are traded via over-the-counter. There is no central market for trading spot gold and silver but the main centers are London, New York and Zurich.

Why trade spot metals?

There are several reasons why trading spot gold and silver is beneficial. Along with diversifying your trading portfolio, spot metal trading is advantageous in terms of hedging opportunities and it being a type of safe haven.

There is volatility in spot metals which in turn provide trading opportunities in rising and falling markets. Spot gold trading has become a popular asset to trade due to its greater price volatility. It is considered a 'safe-haven' investment. When there is high volatility, traders have the option to move funds to gold for safety measures against risk. It is also used as a hedge against inflation and financial crises caused by economic, political or social chaos.

Spot silver trading is ideal for traders who want to trade volatile assets but at the same time risk little capital. It is a more volatile and inexpensive version of gold.

Trading spot metals

A spot gold or silver quote is read and represented similarly to a Forex quote. Spot gold traded against the US dollar is represented as - XAU/USD. While spot silver traded against the US dollar is represented as - XAG/USD. Traders analyze market conditions and price history to predict how gold or silver performs in relation to the US dollar. There is no physical delivery of gold or silver involved.

Spot gold and silver quotes also include a BID and ASK price. Like Forex, the BID is the price at which you can sell, while the ASK is the price at which you can buy. The difference between the BID and ASK price is called SPREAD.

Factors affecting spot gold trading

There are a few of factors that can affect spot gold trading. Firstly, it is the US Dollar. If the US Dollar weakens, the price of gold will rise whereas if the US Dollar strengthens, the price of gold will drop. Jewelry is also an affecting factor. The consumption of gold in countries such as India, Italy, Turkey or China gives a significant influence on the price of gold. Trading volumes and demand increase of gold is now heightened since it is traded in exchanges and online like other financial products. This is also another factor affecting spot gold trading.

Gold and silver have always had a valuable status and today it's even become precious for traders and investors alike. Thanks to its many benefits, spot metals are being traded globally, giving traders the chance to become successful and profitable.

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