Though crude oil often dominates the newswire when it comes to commodities, metals could in fact be a far more profitable choice within this asset class. Growth was a consistent trend for all of the major metals traded in 2020. Thus, there is every reason to expect that this year they will continue to increase in value.
Below we have looked at some of the most popular metals traded in the financial markets. We cover what makes each metal valuable, as well as what possible vulnerabilities might weaken it. In other words, this is the ultimate guide to trading metals in 2021.
All of the metals covered in this article are part of the trading portfolio of SuperForex. You can trade them in the form of futures and CFDs.
Gold is arguably the most popular metal among traders. People use it to hedge investments when risk aversion is high because it has somewhat of a safe haven status. In addition, its value increases whenever the US dollar declines.
The yellow metal has been growing in value for five consecutive years. In 2020 alone, gold was up close to 30% compared to the previous year. Analysts expect that gold’s rally will continue in 2021.
Note, however, that due to its safe haven status gold tends to weaken on market optimism. Thus, as countries make progress in Covid-19 vaccinations and the pandemic comes to an end, gold could weaken. The reflationary trends boosting the dollar can also be a potential downside risk.
If any precious metal can outshine gold, it has got to be silver. With a growth of almost 50% in 2020, silver was the best metal to invest in last year.
The main reason for silver’s rally is its use in the solar power industry. Silver is essential in the making of photovoltaic cells for solar panels. Considering the world is increasingly looking to move to renewable energy sources, the demand for solar power is growing. This trend translates directly into more demand for silver, boosting its price.
Besides renewable energy, silver also has a use in the production of chips, cables, and other tech equipment, all things that are in high demand.
Due to its versatility and role in many booming industries, silver may cement its status of the best-performing metal in 2021 as well.
Thanks to its many industrial uses, palladium has also been rallying for a while. In 2020, this metal increased its price by 26%.
Palladium is part of internal combustion engines, which are essential for the car-making industry. In addition, it can also be used for making fuel cells for electric vehicles, where it competes with platinum. Moreover, the laptop and smartphone industries also require high amounts of this element.
Thus, palladium is likely to remain in high demand in 2021 and continue growing in value.
This precious metal plays an important role in car-making. Traditionally, platinum has been used in the production of diesel engines, but it also has a place in a greener world. For example, It is part of the hydrogen fuel cells in some electric vehicles.
Platinum also has a role in making computer hard disks, optical fibres, and as a catalyst in the chemical industry.
Platinum rose in value by 11% last year. So far, its trend in 2021 has been a bit mixed, largely due to the big sways in the financial sector. Like gold and silver, platinum benefits the most from risk aversion among investors. Yet, as the pandemic dies down in certain parts of the world, risk appetite is on the rise, pressuring the value of this metal, at least in the short term.
At the same time, improving industrial indicators that point to more demand for this element will help its price increase.
Like many of the other metals on this list, copper has a wide range of uses. The chief fields that demand copper are the automotive, the electronics, and the construction industries. One could argue that copper is even more in demand than some of the metals mentioned above.
In February alone, copper increased from $3.5 to $4.3 per pound, or about 23%. Though it has since retreated from this high and now trades around $4 per pound, that is still a multi-year high. All of the prospects of further growth in copper prices remain strong.