Is the gold rush finally over for precious metals?
Zoe Fiddes from Easy-Forex asks if investing in metals has lost its shine
For many years now the price of metals has been on the rise. Gold climbed by over 45% this year to record levels and silver almost doubled in price from January to April. Traders that took long (buy) positions early this year would have been laughing all the way to the bank.
However, it is not only the precious metals that have experienced such steep rises. Take copper for example, the forgotten precious metal; it has quadrupled in price since 2008. Metals rose so quickly many would argue they became overbought at levels that were unsustainable; gold traded at $1,920 (£1,240) per ounce and silver at $44 (£28) in August. However, metals have been falling like a lead balloon so far this month which begs the question: has the precious metal bubble burst? Since early September gold lost half of its 2011 gain.
The trading behaviour for September suggests that metals were too expensive and, given the ongoing financial struggles around the world, demand for these metals declined. However, looking at the longer-term outlook, we know that demand for commodities on the whole is driven by the urban power houses in the developing world. With over 50% of people living in urban areas, cities are rapidly growing. China is leading the way with its cities expanding at an average of 10% annually since the year 2000.
With urbanisation set to continue in the long run, demand for metals will stay.
One aspect of trading commodities over other assets, such as equities, is that no matter which way the market is moving there are always opportunities to profit in the short or long-term positions. And it's not only fat cats in the city who have the chance to take advantage of this volatility, since online trading accounts are now accessible and priced to attract novices through to experienced traders. With such accounts you can trade small positions in these metals with as little as a £50 investment.
Please note that Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. Do not invest money that you cannot afford to lose. The information provided here is for informative purposes only, and can under no circumstances be considered as a recommendation to engage in any trade. Easy-Forex Trading Ltd is regulated by the Cyprus Securities and Exchange Commission (CySEC) (License Number 079/07).