How to trade precious metals online

There are four primary precious metals – gold, silver, platinum and palladium – and numerous ways to trade them. Read on to find out how to trade precious metals online.

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How to trade precious metals online – an easy five-step guide

To start trading precious metals online, it’s a good idea to read up on the different trading and investment methods available to you. Once you have a good understanding of your options, you can choose the best precious metals trading method that works best for you.

Here’s a rundown of steps to take when planning your route into precious metals trading. 

  1. Learn your trading strategy. Precious metals trading can take numerous forms, from buying physical metal in the form of bullion to sophisticated, contract-based trading. Pick an approach that works best for you, based on factors like your level of knowledge and your risk tolerance. 
  2. Decide your budget. The amount of money you have available trade with will have an impact on the kind of trading method you use, how aggressive you want to be, how much risk you want to take and how often you want to trade. Decide your budget ahead of time. There’s a big difference between deploying £500 and £50,000.
  3. Choose your precious metal type. If you plan to buy precious metals bullion, figure out which type suits you best. You can choose from gold, silver, platinum, or palladium. You can then choose bars of different sizes, or coins of different designs. Your decision should take into account purchase price, storage capabilities, and more.
  4. Select your broker and sign up. When choosing a precious metals broker, you’ll want to choose one with a stellar reputation, an easy-to-use trading platform and competitive transaction fees. This page will help you make that selection. 
  5. Place your first trade. You’ve done all your research. You’ve nailed down your trading strategy. Time to get started. Click Buy, and you’ll be the proud owner of a precious metal.

Types of precious metals to trade

Here’s a list of precious metals trading methods you can use:

Contracts for difference

A contract for difference is an agreement between two parties that lays out how the buyer must pay the seller the difference between the current value of an asset (such as a precious metal) and the asset’s value at contract time. 

  • Pros of CFD Trading: You can take both long and short positions, betting on the value of the precious metal to either go up or down. Most CFD brokers don’t charge transaction costs, instead making their money from the spread (the difference between the bid and ask price). CFD trading lets you trade with leverage, giving you the ability to make much larger transactions with smaller amounts of capital.
  • Cons of CFD Trading: Just as you stand to make more money in a leveraged trade if you make the right call, you’ll face a bigger loss if you don’t. If the price of the asset drops below a certain point and you don’t have enough money in your account to cover your position, you could wind up with nothing. Leave a CFD position open overnight and you’ll probably have to pay a fee.

Precious metals certificates 

Precious metals certificates are certificates of ownership. Allocated certificates mean you own specific bars of a precious metal, while unallocated certificates aren’t linked to specific bars, rather the dollar value of however much of the precious metal you own.

  • Pros of precious metals certificates: Owning a precious metals certificate lets you avoid the hassle, worry, and cost of storing and insuring physical bars or coins. Transaction fees for precious metals certificates can be lower than the fees associated with other precious metal trading methods.
  • Cons of precious metals certificates: In the U.S., precious metals certificates are considered collectables by the IRS and you’ll have to pay a 28% capital gains tax on your net gain if you sell any collectable. Certificates usually require you to invest in larger minimum amounts than straight purchases of bullion. If you buy a precious metals certificate and the issuer of the certificate goes bankrupt, you may become an unsecured creditor and struggle to recover 100% of your investment.

Precious metals futures 

A precious metals futures contract is a legal agreement to buy or sell a precious metal at a predetermined price at a specific time in the future. 

  • Pros of precious metals futures: Futures contracts can be used as a hedge against price fluctuation. The pricing model for futures contracts is simpler than it is for some other trading methods.
  • Cons of precious metals futures: Unexpected future events (such as a labour stoppage or natural disaster) can cause big price fluctuations that may hurt your trade. Futures contracts carry an expiration date and the contracted price for a given precious metal can become less attractive as that date gets closer.

Precious metals options

A precious metals option gives you an option – but not the obligation – to buy or sell the bullion of a precious metal on a future date at a set price. A precious metals futures contract is the underlying asset securing the investment.

  • Pros of precious metals options: You can trade with leverage, giving you the possibility of bigger gains using smaller amounts of capital. You can go long or short on your options trades, depending on whether you’re bullish or bearish on the price of a given precious metal.
  • Cons of precious metals options: Stock options contain a time value that is constantly diminishing, which means an options trader must be proven right within a certain amount of time. Transaction fees tend to be higher when buying options.

Precious metals ETFs

An ETF (Exchange Traded Fund) is an investment vehicle containing numerous assets (in this case gold, silver, platinum, and palladium) that’s traded on exchanges like stocks.

  • Pros of precious metals ETFs: You benefit from price appreciation in precious metals without having to store and insure any physical bullion. You get to invest in multiple different precious metals at once. Low management fees keep cost down.
  • Cons of precious metals ETFs: If the price of physical goal skyrockets you still benefit, but you’d probably benefit more if you owned physical gold rather than an ETF.

Know what affects metal prices

Precious metals prices can rise and fall for a number of reasons:

  • Supply and demand. The supply of a given precious metal can get affected by numerous factors, including labour stoppages and mining discoveries. As for demand, precious metals are often used as a hedge against economic and stock market downturns, so when a recession or bear market kicks in, precious metals prices often rise.  
  • Market sentiment. Try as they might, investors still get sucked into trading decisions based on emotions such as fear and greed. So when they see the price of precious metals shooting higher, greed might prompt them to jump in to buy, creating even bigger gains. On the downside, falling precious metal prices can trigger fear, which may lead to sell-offs and further plunges in price.
  • Market volatility. Aside from the physical direction of precious metal prices, periods of volatility can cause wider swings in both directions. Make sure you have a plan for managing that volatility.
  • Central bank reserves. Central banks’ actions can impact the price of precious metals. For instance, when central banks transition from holding paper currency to holding precious metals, the price of precious metals will usually be driven up.
  • Worldwide jewellery and industrial demand. Gold, silver, platinum, and palladium can be fashioned into jewellery and used for many different industrial purposes. So when demand for those particular uses goes up or down, precious metals prices will likely respond.
  • Value of the U.S. dollar. The price of precious metals is typically measured in U.S. dollars. That means if the dollar goes down in value, precious metals prices go up, because more gold, silver, platinum and palladium can be purchased when the dollar is weaker. 

How to sell your precious metal asset online

When selling your precious metals online, follow these steps: 

  1. Log in to your trading platform.
  2. Open your existing trade.
  3. Check the price of the precious metals asset you own (whether it’s a CFD, ETF, etc.)
  4. Check the spread being offered by the broker to make sure you’re OK with it.
  5. Sell your position.

Precious metal trading tips for beginners

Hopefully, you now have a broad overview of how to trade precious metals online. Here are our top five tips to take onoard when trading precious metals online.

  1. Establish your trading goals. Are you trying to make a quick profit with precious metals trading, or would you rather hold for bigger potential gains? Know what you want to accomplish before you start trading.
  2. Figure out your risk tolerance. Are you the fearless type, or does volatility scare you? This temperamental assessment should significantly impact the way you trade, especially if you want to trade with leverage. 
  3. Know your budget. If you have a small budget allocated to precious metals trading, you might be better off buying something like an ETF (which allows you to buy and hold) as opposed to a CFD, where holding for more than a day can start to rack up fees. Too many fees can sap a small budget in a hurry. 
  4. Assess market conditions. Are you buying when precious metal prices are trending up, or down? The broader market will dictate the price movement of whichever precious metal you want to trade, so make sure you see both the trees and the forest.
  5. Pick the specific precious metal and trading method that works best for you. Trading gold options is different to buying a palladium certificate, which is different to silver CFD trading, which is different to a precious metals ETF… You get the idea – make sure you fully understand the investment you’re about to undertake before you go for it.

Try some of our investment courses for beginners

Still not quite ready to trade precious metals? We get it. We recommend learning the fundamentals of precious metals trading with our easy-to-follow educational courses. You’ll feel better prepared and more confident.

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Harry Atkins
Financial Writer
Harry joined us in 2019, drawing on more than a decade writing, editing and managing high-profile content for blue chip companies, Harry’s considerable experience in the… read more.