Gold and silver are often traded online without physical ownership of the precious metal. There are many pros and cons of trading precious metals which this article will explore. Gold and silver have significant roles in industrial applications, driving a large percentage of the mining activity. You may have heard of the speculative price changes of gold and silver in the commodities markets. The value of these changes is crucial to traders who use these for gain. Gold and silver are traded as commodities in the commodities markets, similar to a currency in the financial markets. The main advantage of this market activity gives liquidity to a large group of trading investors.

Rewards of trading precious metals

Stability

Gold and silver will not likely go to zero due to economic conditions. Liabilities from banks can come due and currency may lose value during troubled economies. The two precious metals have intrinsic value based on their appeal, and rarity. Governments can default on their debts, but your portfolio will keep value with gold and silver.

Hedge against inflation

As nations change the amount of currency they have in the market, inflation ebbs and tides with the float of money. Gold and silver remain constant as a limited resource.  Typically, and especially with gold, the price will tend to go up in times of economic depression. No government currently links gold or silver to its currency. Yet, the price of gold has risen steadily in the last five years, with a lagging U.S. economy.

Liquidity

The market for gold and silver is an international one with interested buyers and sellers constantly at work. This makes the market one of the best liquid markets in the world.  Most investors are willing to buy precious gold or silver as they hold their value.

Risks of trading precious metals

Low short term returns

If you compare the price rate of change of gold or silver to other commodities trading you will see a relatively lower rate of change. These two precious metals change price slowly. You need to trade for a longer period of time to make significant returns.  Precious metals have slow rate of return.

Volatility in price

While gold and silver have substantial price correction, the over positive changes are geared to longer term investment.  The short term speculator may experience price changes with risk of loss, to the disadvantage of gold or silver investment.

Counter inflationary growth

While growth during inflationary periods and currency drops is a stabilizing force, it limits the timing of when price growth typically occurs with gold and silver. There is simply not as much time when gold and silver are experiencing growth that can be exploited short term.

Conclusion

Gold and silver are key playing cards of the investor’s hand in financial markets. They have proven profitable trading tools to those investors who trade short term. Forex trading has made online trading an accessible method of trading without the need to physically owning the gold or silver. With gold and silver trading the trader have many methods to profit from the advantages available in today’s electronic markets.

This article is contributed by Joseph Vietor.

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2) Why Buy Silver Now?