Money Advice

Complete guide to trading Precious Metals in South Africa 2022

Published by
Parddon Khumalo

The term “precious metals” includes gold, silver, platinum, and the other platinum-group metals (PGMs), which include palladium, rhodium, iridium, ruthenium, and osmium. They are noble metals; they withstand acid and other reagent assaults and do not corrode readily (although silver does tarnish). Since the dawn of time, gold, silver, copper, platinum, and palladium have been recognized as valuable; their rarity accounts for their high value.


They are costly, difficult to mine, and heavily traded by investors. They are employed in industrial operations. Precious metals are held in the majority, if not all, economies with the goal of storing or locking in wealth. Gold, in particular, is regarded as a wealth repository. It has the power to safeguard money, particularly during economic downturns. Banks, investors, and other financial market participants are constantly looking for profitable ways to trade gold, causing its price to vary significantly.

The fact that there is always a willing buyer and seller in the gold market adds to the excitement of trading it. This article discusses several methods for trading precious metals in South Africa. Given that South Africa’s economy is claimed to have been founded on gold, Johannesburg is also known as ‘the city of Gold.’ In the majority of our examples and illustrations, we will use the term “gold.”

Which precious metal is the best to trade?

Consider the four renowned metals: gold, silver, platinum, and palladium. Which metal is more suitable for trading? To be sure, each has its advantages. While gold is by far the most popular precious metal, its sister metal silver comes close behind and frequently outperforms gold due to its twin role as a store of value and an industrial metal. Platinum is not regarded as an investment in the same way that gold and silver are, but it can be an attractive option for traders, particularly when it begins to trend.


Finally, there is palladium, which is relatively similar in price to platinum, so dealers can typically choose one or the other. Historically, precious metals have been traded in the form of refined bars or bullion bars. Although mining companies market directly to bullion dealers, the bars are sold to them. Bullion traders sell these metals to jewelers and electronics manufacturers who turn them into finished consumer items. Today, traders can buy and sell precious metals without physically handling coins or bullions. Numerous trading platforms simplify the process of trading by connecting buyers and sellers with the touch of a button.

What factors influence precious metal prices?

There are two factors that are the primary drivers in the prices of all precious metals. Those two factors are supply and demand. In many cases, new traders only consider the demand side of this equation, but that can definitely lead to some unexpected price moves when supplies are either cut short suddenly or increased rapidly.

In the case of silver, platinum, and palladium there can also be changes in industrial demand which can impact the prices of the metals. Any change in automobile production is likely to see all three of these industrial precious metals change price dramatically.

As global economies improve, precious metal prices seem to have taken a hit since fewer investors feel the need to look for a safe haven.  The South African GDP used to largely depend on the export of gold, but economic development has shrunk that dependency and tertiary economic activities have taken larger claims of the GDP.

However, during economic panics like the one induced by the effects of Covid-19, trading of precious metals begins to rally as more people and organisations seek safe havens for their investments.

For a clear understanding, you should check out the gold trend from the start of the Covid-19 induced lockdown to date. Observation shows that gold prices went up as panic over coronavirus spread worldwide.

But since the announcement by scientists on the breakthrough on the coronavirus vaccine a few days ago, the gold prices have significantly dropped. The discovery of the vaccine means the economy is at lesser risk now hence there is no need to buy more gold as a means of locking wealth which has led to the downturn of gold prices.

Factors Influencing Precious Metal Trading

Several distinct factors come into play when analyzing the prices of precious metals:

Supply – can be affected by a decline in production and political instability. If the scale of precious metal injection into the market declines, the metal prices tend to go high as demand starts to overwhelm supply.

Political instability, tight industry restrictions and policies tend to affect the level of production hence affecting the prices.

Demand – mainly comes from jewellery, use in everyday technological products, and for investment purposes.

It should be noted that each metal is different and so their prices are affected by different factors. For example, gold and silver prices can be affected by increased or decreased demand for jewellery and by changes in the demand for a store of value.

During economic uncertainty, demand for gold or gold-related investments can increase as a means for investors to protect their wealth. It is therefore critical that you conduct a thorough analysis before deciding to trade commodities.

Market Volatility – Precious metals have often been used as a safe haven investment when markets are unpredictable. Thus, hedging a position taken in the market in order to mitigate the risk of loss.

A highly volatile market poses danger for traders, especially if you are also trading other commodities like oil or even currencies. If you do not come up with a risk-mitigating strategy you stand to lose a lot from your positions. In such instances, traders are influenced to trade precious metals as a measure to mitigate the risk of losing everything (hedging).

Therefore if the financial markets become too volatile, traders tend to start moving to precious metal positions and thus influencing metal trades.

Investing in precious metals is a popular way of portfolio diversification. There are several options when looking to invest, starting with coins and bullions. These usually have a very low margin and trade close to the metal’s current market price.

Mining stocks belonging to publicly traded companies give an investor the opportunity to buy them at the production level.

How are Precious metals traded?

Precious Metals are traded through brokers as both direct assets and as CFDs. Major banking platforms like FNB and Standard Bank

allow investment account holders to buy and sell the metals through their platforms. However, most people prefer to trade metals as CFDs through international Brokers like XM.

So it basically depends on your prefered way of trading. If you want to buy directly into the asset, you can use banks but if you need to speculate and make fast profits then trading through broker platforms like XM will be most ideal for you.

What are the advantages of trading precious metals?

One of the top advantages is the easy liquidity provided by precious metals. This keeps the market healthy. Another reason is the ever-increasing demand for precious metals. As demand continues to increase it supports gains in price as well. Of course, trading in precious metals is a good way to diversify if you typically trade in stocks or currencies. Perhaps the greatest advantage of trading in precious metals t is the profit potential they offer traders of all experience levels.

Complete guide to trading Precious Metals in South Africa 2022
Parddon Khumalo

Published by
Parddon Khumalo