3 Principles of the Metal Commodities Market

If you are considering investing in the metal commodities market for the first time, start slow. You may be familiar with strategies such as options or futures contracts, which allow you to gain large profits by correctly betting on short-term commodities prices. While these opportunities are out there, they are typically employed only by sophisticated commodities traders who can correctly anticipate prices. Even these traders bet wrong sometimes, and they can stand to lose a lot of money on a single trade. This does not describe most first-time metal investors. Instead of going after these wealth building schemes, consider tactics for long-term income growth.

#1 Invest for Long-Term Profits

The metals market is a good place to look for long-term returns because of its relative stability on an annual basis. Metals are a hard commodity, which means they can never spoil or go bad, so they constantly retain some value for an extended period of time. Furthermore, they are not affected by swings in weather, climate or transport delays. As a result, the price of metals will generally rise over time at a rate either consistent with or above inflation. Gold, silver and copper are essentially currencies of their own. Investing in these assets will provide you with stability, even if you are not seeing large returns in the short term fluctuations of their prices.

#2 Use Practical Advisers

When you are not looking to get rich quick, do not invest with an adviser who is. A potential trader may contact you with a hot opportunity to capitalize on what he or she sees as a sharp turn in the price of silver. You can make this bet, but if it goes wrong you will lose your investment. Conversely, an adviser may contact you about the relative stability of the price of gold in a market where the dollar's value is depreciating due to inflation. This is more practical and sound advice, and this is the advice you want to follow if you are looking for practical, sound investments. Instead of chasing profits in the short-run with advice from excitable advisers, look for those advisers who stay calm in the face of market swings to deliver long-term profits.

#3 Be Prepared for Risk

Even with a more practical adviser, you are still facing risks anytime you invest in the commodities market. With metals, there is a risk of price bubbles and crashes in particular. You can see the price of copper spike in a given market with nearly no explanation and then crash a month later. This speculation runs counter to efficient market analysis, so your adviser may not be able to account for the trend. Furthermore, when you are investing conservatively and for long-run gains, you may run the risk of simply being too conservative. If the investment you make in silver fails to profit to an extent greater than the rate of inflation in the time you hold the investment, you will actually lose money by switching from a cash investment to a metals investment.

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