Extended data
Significance of precious metal trading
1. Precious metal hedging risk
Precious metals have long been regarded as safe-haven assets. For example, precious metals such as gold and silver are likely to be an important part of a balanced portfolio. Although precious metals also have the risk of price fluctuation, they can be used to fight against inflation or other economic uncertainty risks when used and traded reasonably.
Inflation and inflation expectations are the main driving forces of global financial markets. Every day, investors pay close attention to various economic data and central bank news releases to determine the current and expected inflation path. When the inflation rate is too low or too high, the central bank will adjust the interest rate to adjust the macro-economy, which has a great impact on financial assets. However, a study by Conover et al. in 2007 showed that direct or indirect investment in precious metals could hedge the impact of the central bank's further tightening of monetary policy.
When talking about the Fed, Konoff and others said: "In the period of monetary tightening of the Fed, the income of precious metal commodities was significantly higher than that in the period of monetary easing. This result is in stark contrast to the stock prices of the US stock market and precious metal companies. "
2. Precious metals can diversify the investment portfolio.
Diversification is a means for investors to minimize risks, improve stability and maximize returns. Therefore, precious metals can be an important part of any diversified portfolio. When markets are unstable, they can generate income and serve as a buffer for economic uncertainty.
Investors can gain potential benefits by directly investing in physical precious metals or indirectly investing in ETFs and mutual funds. In addition, they can also invest in precious metal companies, which is another level of diversified investment. According to Conover et al.' s investigation, allocating 25% of the total portfolio to precious metal assets can increase the annual return of investors by 1.65%.
Investors can also use precious metals trading to mitigate the impact of currency market turmoil. Because precious metals are considered as storage means of value and can limit the risk of other losses, they are regarded as global hard currencies, which can prevent the weakness of domestic currencies, such as the US dollar.
3. Precious metals are of universal value and have a great market.
Different from national and regional currencies, hard currency such as gold has intrinsic value beyond its market price. This does not mean that precious metals will not be affected by the market, of course, but unlike foreign exchange, precious metals can preserve their value for a long time. For example, gold, which has been used for thousands of years, is enduring enough to see its value.
Precious metals have almost spread all over the market, and global trading is relatively easy. Investors in physical assets such as gold bars, gold coins, gold bars and gold and silver jewelry can usually find enough markets for their precious metal transactions. In the past ten years, precious metals have experienced a shortage tide, and the demand for physical objects in markets around the world may continue to grow.