Precious metals such as gold and silver have been traded either as currencies, or at least as the basis of currencies, or commodities, for hundreds of years.
Gold and silver are heavily traded these days and are viewed as having a certain "security" and are considered a "safe" investment. As they have been highly valued in our culture for so long, their value is now known intrinsically to us and in times of economic hardship or global economic strife the value of these metals will rise as investors will see them as "safe-havens" for their capital.
Please regard the chart below:
There has been steady rise in the price of gold over time if you look at the long term trend. Towards the end of 2007 through to 2008 Gold rocketed over fears of the credit crunch led investors to seek safer assets for their capital. The price has continued to rise, and In 2011 we saw Gold reach $1500 per oz. and above.
The value of gold not just intrinsically but as a secure asset has led to great increases in trading volumes of late, as well as record-breaking prices.
Gold and silver have been a major part in the creation of currency and trade from ancient times. They were both used to depict a monetary value or representation on how much gold or silver each coin was worth. Both gold and silver have been used as a standardised method of measuring wealth. The silver standard was a monetary system in which standard economic unit of account is a fixed weight of silver. The silver standard was widespread until the 19th century when it was replaced by the gold standard. The gold standard worked on exactly the same premise as the silver standard only it was weighted with gold instead of silver.
However the nature of the gold and silver standard did have its downfalls especially the fact that they created boom-bust economies. Eventually gold and silver standards were replaced by notes and coins made from other sources that were used to represent a monetary value. Even though in the modern world gold and silver are not used as much to barter they are still highly regarded and as such have become a valuable commodity to speculate on.
Copper is an industrial metal used mainly in building and construction such as electrical work and plumbing. This is often considered as an accurate measure of economic growth. If the demand for copper is increasing you will usually see at the same time as this an economic expansion. Chile, Peru, South Africa, North America and China are the largest producers of copper. Any political unrest in the main producing countries, strikes or shipping problems could all cause the price of copper to fluctuate quite considerably.
Here are some key factors that can affect the price of these metals:
Gold price in general will react adversely to the strength of equity indices as investors turn to gold for a more secure asset.
As with equities above, any factors that suggest global economic issues or problems, unemployment, GDP, etc. will again lead investors to seek safer assets in the form of precious metals.
Unlikely to affect short-term prices, but may have an impact long-term. As these metals are minerals that are mined, they are clearly subject to supply pressures. At the moment mining is sufficient to meet demand, but deposits are not infinite.
High grade copper is used across the globe in all industries and as a result the performance of industry can have an impact on the pricing of this metal.
The market has seen gold prices reach record highs due to falling equity markets and global concerns. The last 2 years have provided an interesting time to trade gold and other precious metals and the opportunity for investment is clear. Here are some key points to consider when trading these products.
These products, especially gold, have been very volatile in recent times. Not just over previous years where gold as hit record highs, but the intra-day ranges have been large too, thus providing an opportunity to benefit from these movements.
As gold is very widely traded, there is plenty of information available such as articles, reports and discussion forums, which can help traders to make informed decisions.
The global appeal of gold trading and the immunity to market manipulation and insider trading make trading in metals appealing to investors.