All that glitters is not gold
We'll start with the grand-daddy of them all: gold. Gold is unique for its durability (it doesn't rust or otherwise corrode), malleability and its ability to conduct both heat and electricity. It has some industrial applications in dentistry and electronics, but we know it principally as a base for jewelry and as a form of currency.
The value of gold is determined by the market 24 hours a day, nearly seven days a week. Gold trades predominantly as a function of sentiment; its price is less affected by the laws of supply and demand. This is because new mine supply is vastly outweighed by the sheer size of above-ground, hoarded gold. To put it simply, when the hoarders feel like selling, the price drops. When they want to buy, new supply is quickly absorbed and the gold prices are driven higher. Several factors account for an increased desire to hoard the yellow metal:
- 1. Systemic financial concerns: When banks and money are perceived as unstable and/or political stability is questionable, gold has often been sought as a safe store of value.
- 2. Inflation: When real rates of return in the equity, bond or real estate markets are negative, people regularly flock to gold as an asset that will maintain its value.
- 3. War or political crises: War and political upheaval have always sent people into gold-hoarding mode. An entire lifetime's worth of savings can be made portable and stored until it needs to be traded for foodstuffs, shelter or safe passage to a less dangerous destination.
The silver bullet: Unlike gold, the price of silver swings between its perceived role as a store of value and its very tangible role as an industrial metal. For this reason, price fluctuations in the silver market are more volatile than gold.
So, while silver will trade roughly in line with gold as an item to be hoarded (investment demand), the industrial supply/demand equation for the metal exerts an equally strong influence on price. That equation has always fluctuated with new innovations, including:
- 1. Silver's once predominant role in the photography industry (silver-based photographic film), which has been eclipsed by the advent of the digital camera.
- 2. The rise of a vast middle class in the emerging market economies of the East, which created an explosive demand for electrical appliances, medical products and other industrial items that require silver inputs. From bearings to electrical connections, silver's properties made it a desired commodity.
- 3. Silver's use in batteries, superconductor applications and microcircuit markets.
Spot Metals
| product | symbol | Spread |
|---|---|---|
| Spot Gold | XAU/USD | 40 Cents |
| Spot Silver | XAG/USD | 3 Cents |
Precious metals are priced in USD per troy Oz (troy ounce).
Precious metals trading with Kerford Investments (UK) Limited
Kerford Investments (UK) Limited clients can trade precious metals against the US dollar; USD: gold (XAUUSD) and silver (XAGUSD). In this case, precious metals trading essentially means buying the metal and selling the USD (if long) or selling the metal and buying USD (if short).
Our clients can also trade gold and silver future CFDs. Gold future CFDs are traded under the symbol GC, while silver future CFDs are traded under the symbol SI.
KERFORDUK offers sophisticated trading platforms to help you monitor precious metals prices and trade precious metals.