Metals Trading Guide: How to Trade Base and Precious Metals

Exposure to metals can be a valuable addition to an investment portfolio, with a wide range of use cases depending on the metal like diversification or just profit. However, it's not always obvious how to trade metals or choose the best investment strategy. Throughout this guide, Benzinga explores the intricacies of trading a variety of metals — such as precious, base and ferrous metals — while also examining the pros and cons of choosing between mining company stocks and physical metals for investment purposes.

What Are Precious Metals?

Precious metals are rare, naturally occurring metallic elements that hold high economic value because of their scarcity and various industrial, investment and aesthetic uses. These metals typically have high luster, conductivity and resistance to corrosion, making them highly sought after. The most common precious metals include gold, silver, platinum and palladium. They are often used in jewelry, electronics, automotive catalysts, dentistry and as a store of value or hedge against inflation. Precious metals are also traded on commodity markets and can be purchased in the form of bullion, coins or through financial instruments such as exchange-traded funds (ETFs) or futures contracts.

How to Trade Precious Metals

Precious metals, especially gold and silver, are some of the most popular metal investments because of their status as safe-haven investments and hedges against volatility. There are several ways to trade precious metals, but one of the most reliable methods is through reputable online precious metals dealers.

Some of the best precious metals dealers include Advantage Gold, Red Rock Secured, Birch Gold Group, American Hartford Gold and Augusta Precious Metals. These platforms offer direct delivery and IRA purchases, making them great choices if you want the tax benefits an IRA can provide. Precious metals such as gold, silver, platinum and palladium are safe-haven investments that often perform well during times of economic uncertainty.

How to Trade Base Metals

Base metals, such as copper, zinc, nickel, aluminum, iron and steel, play essential roles in various industries, and their demand is closely linked to global economic growth. Learning how to trade base metals can be a valuable skill for investors.

A few of the easiest ways to trade them are investing in ETFs that track their prices, purchasing stocks in companies specializing in the mining or production of these metals or trading futures and options contracts through a commodity exchange. The latter option can be more complex and requires a more advanced understanding of financial commodities markets.

Here is a list of a few stocks, ETFs and exchange-traded notes (ETNs) for base metals:

Copper: Global X Copper Miners ETF (NYSEARCA: COPX), United States Copper Index Fund (NYSEARCA: CPER)

Zinc: Teck Resources Ltd (NYSE: TECK)

Nickel: iPath Series B Bloomberg Nickel Subindex Total Return ETN (NYSEARCA: JJN)

Aluminum: iPath Series B Bloomberg Aluminum Subindex Total Return ETN (NYSEARCA: JJU)

Iron: BHP Group (NYSE: BHP), Rio Tinto (NYSE: RIO)

Steel: Nucor Corp. (NYSE: NUE), Steel Dynamics Inc. (NASDAQ: STLD)

You can purchase any of these stocks, ETFs and ETNs with top stock broker apps like Robinhood, Webull or eToro. It usually only takes a few minutes to sign up, verify your identity, deposit and start trading with all three platforms. If you want to trade metals more directly, you can sign up for a commodities exchange like HYCM and trade futures contracts.

Are Mining Company Stocks, ETFs or Physical Metals Better Investments?

Mining industry stocks and physical metals have advantages and disadvantages. Investing in mining company stocks can offer higher returns and the potential for dividends. However, they also carry the risk of company-specific issues and metals market fluctuations. ETFs may be your best middle ground if you don't want to buy mining company stocks or have to deal with having metals delivered to you and storing them.

Precious metals like gold and silver are some of the most attractive investments and are generally considered safer and more stable investments than many base metals. They can act as a hedge against volatility and economic uncertainty and as a store-of-value asset. However, the returns on physical metals can be lower than riskier mining stocks, and they come with the added burden of storage and insurance costs.

Weigh Your Opportunities

Base and precious metals trading metals can be a wise investment decision if done strategically and with proper research. Metals can offer diversification to your portfolio, and precious metals can serve as a safe haven or source of profit during volatile economic conditions. However, be sure to consider the different types of metals, investment methods and associated risks before making your own educated decisions.

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