In this article, you will learn more about the main influences on the metal markets and other commodities.
The metal markets have long been important to manufacturers, customers, and traders alike. They are also instruments used for monitoring economic conditions, and it is a widely known fact that metals (especially precious metals) are safe-haven assets. Basically, traders try to protect their investments by buying gold when the situation is dire, according to well-renown sources such as Investopedia or Wikipedia.
But the question is, how do these metal markets work exactly? What are their main drivers? Time to find out!
Supply and demand – the number one factor impacting the metal markets
The prices for a wide array of metals, just like for any kind of commodity, derive from supply and demand. Supply refers to production and inventories, while demand refers to the actual need for consumption or for various other uses.
An additional thing that you need to know is this: current prices do not deal only with immediate supply and demand. They also refer to expectations of future supply and demand. The higher the difference between the actual and the expected results, the more volatile the markets get. Also, unexpected announcements or events further increase volatility.
For example, if something happens to the U.S economy, causing the U.S Dollar price to plunge, investors could turn to gold as a potential hedging instrument. Naturally, gold’s value could go up in such a scenario. And the more uncertain the future looks like; the more volatile gold prices could get.
Where are the metal markets price calculated?
Metals are traded on advanced spot and forward contracts online, including on the London Metal Exchange and the New York Mercantile Commodity Exchange (also known as COMEX). You can also opt to trade metals in the form of CFDs on platforms such as CAPEX WebTrader or MetaTrader 5. Visit our trading platforms page to get more info about them!
How many types of metals are there?
The metals often fall into five different categories: base metals, steel and ferro-alloys, minor metals, precious metals, and platinum group metals. Factors such as supply, price recognition, and acceptance or amount produced are taken into consideration when coming up with these different categories.
Among these five categories, the most important are base metals, precious metals, and platinum group metals.
The global market for base metals is said to be the most developed of them all, notes Wikipedia.com. Exchanges with trading desks around the world deal with transactions equaling trillions of dollars each year. And one of the most famous base metals is copper, as it’s widely used in the semiconductor industry (wikipedia.org).
When we refer to precious metals, we are, of course, talking about gold and silver. For many years, both metals have been used as safe-haven assets. And, unsurprisingly, they both shaped into transparent and accessible markets worldwide.
The most common benchmark for gold is the London Bullion Market Association, an institution operating since 1919. Gold futures, on the other hand, trade on COMEX and on other similar platforms.
Various other financial and investment companies offer diverse trading options based on gold’s market price. Here at CAPEX.com, you can trade on gold's price movements through CFDs. To find out more about the other commodities on our website, visit this page.
Silver also trades on the same exchanges and platforms as gold. However, silver is more volatile because of its lower liquidity and the growing industrial demand for this precious metal, notes thebalance.com.
Platinum Group Metals
The platinum group metals are in limited numbers. That's why the primary producers, such as the Anglo Platinum (world's largest platinum producer), set prices for each of them twice a day. This usually happens at its trading desks in the USA, Hong Kong, and London.
You can trade platinum in the form of CFDs with CAPEX.com, of course. Here are more details about its trading conditions.
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Sources: Investopedia.com, thebalance.com, Wikipedia.com
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