Complete guide to trading Precious Metals in South Africa 2024

The term “precious metals” includes gold, silver, platinum, and the other platinum-group metals (PGMs), which include palladium, rhodium, iridium, ruthenium, […]

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.”

How do I start investing in precious metals?

If you are interested in investing in precious metals in South Africa, here are some steps you can take to get started:

  1. Educate yourself: Before investing in precious metals, it is important to understand the market, the different types of precious metals available, and the risks and benefits of investing in them. You can read books, attend seminars or workshops, or consult with a financial advisor to get started.
  2. Choose a type of precious metal: There are several types of precious metals available for investment, including gold, silver, platinum, and palladium. Each metal has its own unique characteristics and market trends, so it is important to choose a metal that aligns with your investment goals.
  3. Decide on the investment vehicle: There are several ways to invest in precious metals, including buying physical bullion, purchasing exchange-traded funds (ETFs), or buying mining stocks. Each investment vehicle has its own pros and cons, so it is important to choose one that aligns with your investment goals and risk tolerance.
  4. Find a reputable dealer or broker: Once you have decided on the type of precious metal and investment vehicle, it is important to find a reputable dealer or broker. Look for a company with a solid reputation, competitive pricing, and secure storage options.
  5. Purchase and store your precious metals: After selecting a dealer or broker, you can purchase your precious metals and choose a safe and secure location for storage. Some investors prefer to store their metals at a third-party storage facility, while others prefer to keep them at home or in a personal safe.

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.

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 a 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 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 metals through their platforms. However, most people prefer to trade metals as CFDs through international Brokers like XM.

So it basically depends on your preferred 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 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.

Best platforms to trade precious Metals in South Africa 2024

There are several platforms available for trading precious metals in South Africa in 2024. Here are some of the popular options:

  1. BullionVault: BullionVault is a well-known platform for buying and selling gold, silver, and platinum. It is easy to use and offers competitive pricing, making it a good option for both beginners and experienced traders.
  2. JM Bullion: JM Bullion is another popular platform for buying and selling precious metals. It offers a wide range of products, including gold, silver, platinum, and palladium, and provides competitive pricing and fast shipping.
  3. APMEX: APMEX is a leading precious metals dealer that offers a wide variety of products, including gold, silver, platinum, and palladium. It has a user-friendly website and offers competitive pricing and fast shipping.
  4. Kitco: Kitco is a well-established precious metals dealer that offers a wide range of products, including gold, silver, platinum, and palladium. It provides real-time market data and offers competitive pricing and fast shipping.
  5. Rand Refinery: Rand Refinery is a South African-based company that offers a range of products, including gold bars and coins. It is one of the largest gold refineries in the world and provides a safe and secure platform for trading precious metals.

It is important to conduct thorough research and due diligence before choosing a platform to trade precious metals, taking into account factors such as pricing, fees, security, and reputation.

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