There are a variety of benefits to owning physical metals – such as gold and silver – but it might not be for everyone. Here, we’ll talk you through the differences between buying precious metals, and trading on their price movements.
Owning vs trading gold and silver: what’s the difference?
When you take ownership of gold or silver, you’ll be buying a specific amount of the metal – usually as coins or bars, such as those available on coininvest.com. As demand for the metal increases, and supply decreases, your investment would rise in value and you could sell the metals on for profit later or keep them as a store of value.
When you trade gold and silver, via derivatives such as CFDs and spread bets, you’re still getting exposure to precious metals, but you don’t take physical ownership of the assets. Instead, you’re speculating on whether gold or silver will rise or fall in price over a set amount of time – usually a much shorter timeframe than investing. If your prediction of the movement is correct, you profit, and if your prediction is incorrect, you lose.
Benefits of investing in precious metals
There are a number of benefits to owning physical metals, including:
- High levels of global liquidity: when you want to sell your investment, you can find a cash buyer quickly.
- Precious metals are a safe haven during global crises: which means they retain or increase in value when other financial markets decline.
- They diversify your portfolio: giving you an additional area of growth away from shares or currencies.
Learn more about investing in metals with coininvest.com
Benefits of trading precious metals
Trading metals comes with much the same benefits as buying the underlying coin or bullion, in that the markets are highly liquid, you’ll get the same exposure to safe haven inflows and you’ll be able to diversify your holdings.
The main differences you’ll find come from the fact you won’t own the precious metal in question. While initially, this might seem counterintuitive, there are some unique advantages that this gives you.
For example, with spread bets and CFDs you can:
- Get the ability to go short: this means you’ll profit if precious metal falls in price. This gives you a whole new range of opportunities for speculation as well as hedging any existing positions you hold.
- Trade in a tax-efficient way: both spread bets and CFDs are exempt from UK stamp duty, and spread betting is also exempt from UK Capital Gains Tax. *
- Leverage your positions: this means you’ll only need to put down a fraction of the cost in order to open a full position, making your capital go further. It’s important to note that while leverage can magnify profits, it can also magnify losses, making risk management vital.
You can trade metals, along with 12,000+ other financial markets, through our partnership with City Index – another member of the StoneX Group Inc.
*Tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.