Knowing how to diversify their portfolio is very important for traders. This allows them to ‘play on several fronts’ and to cover any losses through transversal gains.
Many traders decide to have in their portfolio assets that ensure them a profit more or less safe. Those assets are defined ‘safe heaven’ investment and we are talking about precious metals such as gold and silver.
Gold has always been the symbol of prosperity. Countries base their national reserves on this precious metal. Silver is paired with gold, it follows the same trends and tendencies but it is more speculative and more volatile. They are both traded in dollars and cents per ounce.
Considering that Gold and Silver are priced universal worldwide, they can provide a lot of advantages.
These precious metals have a high volatility: the price is constantly changing in a seesaw of ups and downs and therefore are very suitable for markets as binary options where you can trade with options to 30 seconds or 60 seconds. The volatility is an essential element to achieve high profits.
The economic news influence these commodities so it is essential to understand what is going to happen in the market. For example, weekly reports, which have an effect on the short term and generate strong price fluctuations.
The liquidity in the market of gold and silver are high compared to some other forms of trading and this means there is a better chance of finding a buyer or a seller if you want to sell or buy.
Gold is considered as ‘inflation hedge’ because it may be used as a hedge against inflation since its price tends to rise during inflationary periods. Investors can use gold trading as a way of balancing their profit and loss against currencies trading. Even if the market conditions change, precious materials keep their purchasing power.
Investing in gold or silver gives to traders an opportunity to diversify investments and risk. Peter a. Grant says that “An allocation to gold has been shown to protect and enhance returns while reducing volatility,”
To help investors diversify their precious metal holdings and determine if it’s an optimal time to purchase gold or silver, traders use the gold/silver ratio evaluating the relative value of silver.
By their definition of ‘safe havens’, traders must be very careful in terms of market analysis and research. The ideal method is technical analysis, but this must always be accompanied by the fundamental analysis.