Precious metals are renowned as one of the most popular and lucrative asset classes in the financial marketplace, from gold and silver to the lesser-known palladium.
This asset class is also home to a number of alternative and lesser-traded metals too, including chrome, titanium and vanadium. Interestingly, the majority of these are commonly mined in South Africa, which is home to a thriving and lucrative precious metal business.
We’ll explore this further below, while appraising the investment opportunities that exist within this space from a trading perspective.
Is South Africa Really a Haven for Precious Metals?
The year 2020 was certainly a prolific one for precious metal mining in South Africa, particularly when you consider platinum group metal production.
This category generated an impressive 219.7 metric tons over the course of a hectic 12 months, while it remains home to various materials such as platinum, palladium, rhodium, ruthenium, osmium and iridium.
Outside of this categorisation, 90.8 metric tons of gold were also mined in South Africa through 2020, while a further 12.2 metric tons of chrome ore were also produced throughout the region.
These figures highlight South Africa’s prolific nature as a miner and producer of precious metals, with this central to the region’s economic output and the overall mining industry that underpins it.
For example, the mining sector contributed an estimated 8.2% of South Africa’s global GDP in 2020. This space also employed more than 451,427 people nationwide during the same period, creating a significant source of income for the residents of numerous countries.
Appraising the Importance of Precious Metals for Investors
Not only are metals crucial to the South African economy, but they also play a pivotal role in the world’s financial markets. They’re certainly widely traded through online brokerage sites such as Tickmill.com, usually as part of vast and diversified portfolios.
In general terms, precious metals are also thought to provide an excellent hedge against inflation, while they provide a secure source of wealth during periods of economic uncertainty.
This is particularly true in the event of gold (the market leading precious metal), which typically sees its value appreciate during times of economic tumult and decline as productivity and GDP growth return.
While few precious metals are equal to gold in this respect, other assets in this category offer their own benefits and potential risks to investors. Take silver, for example, which is known more as an industrial metal that may see its value increase as economies begin to recover from recession.
What are the Best Ways to Invest in Precious as an SA Investor?
It’s also worth noting that in addition to providing a secure store of wealth, gold can be traded freely through derivative products such as exchange-traded funds (ETFs) and contracts for difference (CFDs).
These products enable investors to profit by speculating on the various price fluctuations of gold during a predetermined period of time, with forex CFDs particularly beneficial.
In this instance, the instrument XAU/GOLD is the trading instrument of choice, and there’s no doubt that this investment vehicle has introduced significant flexibility into how gold and similar metals can be traded.
For SA investors with increased knowledge of the mining industry and its leading players, there’s also an opportunity to target the most profitable firms and trade gold indirectly through this vehicle.