Gold and Silver Traders – How to Trade Like a Pro

Gold and Silver Traders – 100g gold bars
Bill Cascade   NEW 22/07/2019 00:00:00 Guides

When it comes to trading, silver and gold offer plenty of opportunities to profit from. Trading silver and gold is popular among many traders. For this reason, it merits many an attractive investment. 

You will come across those traders who prefer one over the other – gold or silver trading. One is usually viewed in relation to the other. Both are used all around the world as momentary metal. 

Here we look at both elements discussing how to trade with silver or gold and the gold-silver ratio. We also look at whether one is safer or yields better results than the other.


Gold and Silver Traders - Gold Bars

Why Gold Trading is Popular?

Gold is perhaps one of the most highly sought after of precious metals all over the world. This has indeed been the case since ancient times! It is highly coveted regarding both its financial and cultural value. 

Gold was intrinsically linked to US dollar pricing into the 1970s. It also integrated well into the twentieth century to the world's currencies.

Gold is the most attractive market for many traders due to several reasons, including:

  • It’s a great asset that people tend to rely upon around the time of fiscal or political uncertainty
  • It can’t be expanded at will like, like a currency
  • No underlying company can go out of business with gold, unlike stock
  • Gold is often used as a hedging tool, against currency devaluation or inflation

What Factors Influence the Price of Gold?

To be able to trade in gold like pros do, it’s a good idea to understand its influencing factors. These include things such as:

The supply and demand for gold. Gold is heavily influenced by rising demand. This demand increases constantly. The amount of gold bought annually has, in fact, quadrupled since the 1970s. Yet, such demand requires more gold than is currently supplied by the mining industry. So, the shortfall comes from recycled gold. 

The Price of the Dollar. A complicated and often inverse relationship exists between the US dollar and gold! When the dollar falls, investors seek an alternative source of value. A rush in buying gold then drives up its price, Then, when the dollar falls, other currency values increase. This means a greater buying power, which increases gold demand also. Whereas before it was unaffordable. 

Economic Uncertainty. In times of financial Stress and political crisis, gold tends to retain its value. Thus, it’s often considered a safe haven investment. Gold has indeed become popular in investment. Nowhere is this clearer since the uncertainty facing the world’s economy since 2008.

Inflation. A sustained rise in general prices usually leads to higher interest rates. Thus, interest rates and inflation are closely related to one another. Gold will typically perform strongly in high inflation and deflation circumstances. You’ll tend to see this when there’s a sharp rise in financial stress. So, lower negative interest rates can prove positive for gold.

Top Tips for Trading Gold

To be the best at trading gold, there are many tips you can access and use in your trading endeavors. Here are some that will help you most:

  1. Developing a trading plan - Work on developing a plan here that has a set risk-reward ratio. Then, aim to stick to it. This is vital with gold because of the very nature of its emotional reactions here. You’ll find some people trading in gold place too much emphasis on single trades. Or, they add to losing positions. You need to take this away from the equation. Instead, think of this commodity in price movements.
  2. Utilize charts to analyze the market - Charts provide a good sign of the behavior of gold over many different time frames. Here you can back-test your strategies. Search for those patterns and wait for breakouts before trading. Also, trade with the trend here.
  3. Understand why gold is so valuable - This means learning what moves gold. Gold has its own price drivers that you need to be aware of when trading. Though, it isn’t great as affected by economic and political events. This is as opposed to some other markets. So, discover why the gold you trade is so valuable. 
  4. Look at gaining indirect exposure to gold - Keep an eye out on news and fundamentals that will help inform your trades. You can trade in CFDs or access spread betting. This can be done on those companies share prices who mine gold. Such share prices can often be of good value. This is especially when compared to that of the cost of gold itself.


Gold and Silver Traders - Silver Bars

Why is Silver Trading Popular?

Silver has been synonymous with currency throughout history. A great example of this is the British pound. It’s called a pound because it used to equal to a pound of silver. Furthermore, in over 14 languages, the words used for silver and money are the same!

Silver may not be as rare as its more illustrious of cousins, gold. Yet, there are a couple of benefits that still make it an attractive market. These include:

  • It has a wide diversity of industrial applications
  • As an investment, it’s considered a safe haven
  • It’s ideal in those times of economic uncertainty
  • For precious metal, it is relatively volatile.
  • In bull markets, it can offer more significant returns
  • Compared to other precious metals, it has a lower cost of entry

What Factors Influence the Price of Silver?

To trade like a Pro here, it’s best practice to make yourself aware of the factors that can influence its price. These can include things such as:

The supply and demand for silver. Silver, like any other financial asset, is dependent on supply and demand. Though, it does have many uses in both the industry and beyond. Its supply is also more abundant than that of gold. 

Economic uncertainty. Many traders refer to silver as having inherent value. This simply means that in financial difficulties or even political crisis, it stores value.

Industrial output. Industrial output levels can indeed have a significant effect on price here. This is because silver has many uses in the industry. Examples here include LED Lights, photographic film, batteries, and solar panel production.

Demand for other metal types. Silver is often extracted from the ore of different metal types. So, for example, if demand for a mineral used in silver mining spikes, you may find a surplus of silver. 

The price of the dollar. Silver, as with all precious metal types, is dollar-denominated! So, it’s an attractive investment. This is especially so when the price of the dollar is low. But this can drive up its worth as a result.

The price of gold. It’s often said in the industry that silver tends to follow where gold trading goes. This is by no means an absolute rule. But there exists evidence of price correlation between these two metals. 

What Are the Top Tips for Trading Silver?

  1. Make the decision about whether to invest or trade daily - Decide whether you want to take advantage of short term price movements here. Or do you want to invest in silver over a longer-term? There are many ways of speculating on the price movement of silver. Thus, to get the most from your trading here, you’ll need to choose the right method for your needs.
  2. Access and make full use of all technical charts - Discover some of the most innovative continuous silver charts. This will put you in good stead here. You can then back-test your technical strategy, applying it to years of price action. This is essential to do so as it can help you maximize your profits while minimizing your losses. This is regardless of how long you plan on holding your silver for. Thus, you can develop the best opening level. You can also use the best closing position throughout your trading.
  3. Consider exposure to other Silver means - The most common of silver is in its precious metal prices. But, there are other means available. It’s a good idea to look out for shares in those mining companies specializing in silver. You can also look at silver ETFs, that is exchange-traded funds.

The Gold-Silver Ratio 

You will often hear the Gold Silver Ratio mentioned whenever you trade in silver and gold. This is a way of assessing the value of silver in relation to the value of gold. It is a ratio which represents how many ounces of silver it takes to buy a single ounce of gold. 

Who Takes the Trading Lead – Gold or Silver?

Gold and Silver Traders - Golden Cup for 1st place

Many investors traditionally prefer to invest in gold than in silver. This may be because gold appears a more valuable asset to the human mindset!

But, often, the price of silver will move faster than that of gold. Occasionally, the simple truth is that silver is a better investment at times. Then, at other times, gold is the better investment!

The choice here may very well come down to your trading preference and success in either market.

Overall, both gold and silver make suitable long-term investments. Both prove themselves reliable and indeed valuable and have been doing so for many years now. Thus, it's more than likely they’ll both continue to do so for many more good years to come. 

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