Metals Trading Canada

Metals Trading Canada
Metals

Trade Metals CFDs with FP Markets

CLICK HERE for our full list of Metals & typical spreads

for our full list of Metals & typical spreads

Due to their scarcity, precious metals are an extremely valuable commodity. They also play an important role in global financial markets with the precious metals market having a direct impact on several other asset classes. With FP Markets you can trade the spot price for metals including Gold and Silver against currencies such as the US dollar as a currency pair.

CFD trading is popular with metals as you do not have to buy and store the commodity. Instead, the prices mirror those of the underlying asset as per the largest commodity exchanges. The London Metal Exchange (LME) in the United Kingdom is the world centre for industrial metals trading. It is the location where a significant amount of options and futures contracts in metals are traded.

Traders in Canada do not have to go through the complex process of directly accessing an exchange. Instead, they can trade metals as currency pairs in a similar manner to forex trading. One of the main benefits of having a trading account with FP Markets is the ability to trade other asset classes including forex, shares, commodities, indices, and cryptocurrencies.

View our full list of what you can trade and start trading with a market leading broker.

What are the benefits of trading Metals?

What is the Best Platform to Trade Metals?

MetaTrader 4. The world’s most popular trading platform.

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What is Metals Trading?

Metals have been a sought after commodity for thousands of years. Both non-ferrous and ferrous metals have served an important purpose throughout the industrial revolution and their industrial applications continue to be widespread. This is one of the main reasons why metals trading is closely linked to the outlook for overall global markets.

Commodities are broken up into two categories - soft commodities and hard commodities. Metals fall under the latter as they are typically a natural resource that is mined or extracted. The importance of commodities such as precious metals has an even bigger impact on the local front. This is because Canada is a large exporter of commodities with the Canadian dollar branded as a 'commodity currency'. This means that the value of the Canadian dollar (CAD) is closely correlated with the performance of the commodities market.

Metals can be broken up into several categories with precious metals such as gold, silver and platinum are classified as bullion. Not only are they rare, their historical use as a basis for money has maintained their importance in global markets. Traders often invest in metals to diversify their portfolio as a risk management strategy to hedge against inflation. These are part of a growing list of many metals investment strategies being used by traders.

Supply and demand, interest rates, economic uncertainty and industrial output are among the factors that affect precious metal prices. Gold is one of the most traded commodities and has been traditionally viewed as a safe haven by market participants in times of volatility. The combination of high trading volumes, deep liquidity and the ability to use leverage make precious metals a very attractive asset to trade. The trading environment is well suited for those looking to capture gains on price fluctuations using both short-term and long-term strategies.

An Example of Leveraged CFD
Trading

Traders in Canada can trade metals against major currencies such as the US dollar and Australian dollar. The following example illustrates leverage using XAUUSD, also known as Gold vs US Dollar. Let us suppose that the XAUUSD is trading at:

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You decide to buy 100 oz of XAUUSD (1Lot of XAUUSD) because you think that the XAUUSD price will rise in the future. Your margin rate is 5% (Account Leverage 20:1) . This means that you need to deposit 5% of the total position value into your margin account.

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Now, in the next hour, if the price moves to 1792/1792.50, you have a winning trade. You could close your position by selling at the current price of 1792 USD.

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In this case, the price of gold moved in your favor. But, had the price declined instead, moving against your prediction, you could have made a loss. This continuous evaluation of price movements and resultant profit/loss happens daily. Accordingly, it leads to a net return (positive/negative) on your initial margin. In the loss scenario where your free equity, (Equity - Margin) falls below the margin requirements (8950), the broker will issue a margin call. If you fail to deposit the money, and the market moves further against you, when your free equity reaches the 50% of your initial margin the contract will be closed at the current market price, known as “stop out.”

If the price
of XAUUSD
To You could Gain or Lose
for a Long Position
Resulting in a Return
of the Initial Margin
Rises by 1% 1807.90/1808 USD 1790 20%
Declines by 1% 1772.10/1772.20 -USD 1790 -20%

Metal Spreads

Symbol Product Standard A/c Raw ECN A/c
Avg Min Avg
XAUUSD Gold vs US Dollar 0.34 0 0.16
XAUAUD Gold vs Australian Dollar 0.75 0.06 0.59
XAUEUR Gold vs Euro 0.45 0.27 0.19
XAGUSD Silver vs US Dollar 0.024 0 0.014
XAGAUD Silver vs Australian Dollar 0.06 0.026 0.05

Why Trade Precious Metals with FP Markets?

Precious metals are among the best metals to trade. Through Contracts For Difference (CFDs), traders in Canada can gain exposure to metals markets in a unique way that provides a wide range of advantages. The benefits of CFD trading include:

Margin Trading: Metals CFDs are a leveraged derivative product. This means that traders can open larger positions as they are only required to deposit the initial margin when making a trade. The initial margin will depend on the leverage ratio offered. A ratio of 20:1 represents a margin requirement of 5% of the total value of the trade. In terms of commodities trading, gold is the most traded precious metal.


Go 'Long' or 'Short': The ability to capitalise in price movement in either direction is a major attraction of CFDs. Unlike traditional markets that only allow you to open long positions, with CFD trading you can open short position and effectively 'sell' the underlying asset. As a result, short-selling is a common trading strategy used.


Risk Management:

Advanced trading platforms such as MetaTrader 4 and MetaTrader 5 offer excellent risk management tools. Their features include a large range of charting tools but also a multitude of order types such as take-profit and stop-loss which help minimise risk exposure.


Factors Affecting Precious
Metal Prices

Supply and Demand: The widespread industrial use of metals means that supply and demand play a pivotal part in their value. A shortage in a particular metal or the increased demand for its use can cause significant price movement in an upward direction. This is the case for industrial metals such as copper or aluminium. Conversely, a technological advancement may create an alternative for their use and diminish their value.

Macroeconomic Variables: Data relating to interest rates and GDP affect a significant amount of metals. One of the reasons is because metals are seen as a safe-haven, and an alternative investment to the cash rate provided by financial institutions. You can keep track of critical information using the economic calendar.

Market Conditions: FP Markets provides metals trading against many major currencies including the US dollar, similar to foreign exchange. Metals tend to be susceptible to the US dollar and have historically traded in the opposite direction to the greenback. This is why they are often used as part of a hedging strategy in times of economic uncertainty. In contrast, it would make little sense to invest in the Canadian dollar and commodities as their value is traditionally correlated.

Inflation: Anything that dilutes the value of a currency helps the performance of commodities including precious metals. Historically, quantitative easing and anything that causes a rise in inflation has seen metal prices benefit.

Benefits of Trading Precious Metals

Metals CFDs: As you do not have to not actually own the underlying asset when trading CFDs, there are fewer costs associated with investing in metals this way. There is no need to store the asset and traders can capitalise on price movements in either direction. The prices mirror those found on the London Metal Exchange (LME), the world's largest market for ETFs on base metals and other commodities.

Portfolio Diversification: This is an important strategy used by most successful traders and one that commodities satisfies. With limited correlation to other financial instruments such as stocks and bonds, trading precious metals is a useful way to diversify your portfolio and ensure a balanced investment.

Hedging: Precious metals are often used as part of a risk management strategy. Investors often trade metals to hedge against inflation and currency. With CFDs being a leveraged product, traders are able to hedge against other open positions they may have using less capital.

Safe-Haven: During times of economic uncertainty, the value of precious metals tends to rise. This has historically been the case during economic slumps and key political events including major elections.

Metals Trading - FAQs

With respect to metals, gold is the most traded commodity. Platinum, palladium and silver are among the other most traded metals. They can all be traded with FP Markets. Find out more about Investment Strategies For Metals..

Start trading Metals on IRESS, MT4 and MT5 today!


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