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Alternatives To Trading Gold

Written By

Jemma Grist

Written By

Jemma Grist

Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.

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Edited By

James Barra

Edited By

James Barra

James is an investment writer with a background in financial services. As a former management consultant, he has worked on major operational transformation programmes at prominent European banks. James authors, edits and fact-checks content for a series of investing websites.

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Fact Checked By

William Berg

Fact Checked By

William Berg

William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.

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Updated

Jul 15, 2024

Gold has been a valuable commodity for centuries, making it popular with traders across the world. However, are there better alternatives to trading gold? This guide lists the best gold alternatives for traders looking to diversify their portfolios or pursue gains outside of the safe-haven asset. Our team also explain the benefits and limitations of trading gold.

Is Gold A Good Investment?

Trading gold is popular for several reasons:

• Liquidity: Gold is a highly liquid asset that is widely accepted and traded worldwide.
• Inflation hedge: Gold can be used to hedge against inflation as its price tends to rise when inflation rises.
• Diversification: Gold is often considered a safe-haven asset. It is not typically correlated with other asset classes, such as stocks and bonds, which can help reduce overall portfolio risk.
• Historical store of value: Gold has been a store of value for thousands of years and has historically maintained its value, making it popular with long-term traders.

However, there are also drawbacks to trading gold:

• Lack of income: Unlike other assets such as stocks, gold offers no income or interest payments. Investors often rely solely on capital appreciation to generate returns.
• Limited industrial use: While gold has some industrial uses, such as in electronics and jewelry, it is not as widely used as other commodities like oil or copper.
• Volatility: Gold prices can be volatile in the short term, fluctuating in response to economic and geopolitical events. This can make trading gold challenging and risky, especially for inexperienced investors.
• Market manipulation: There have been instances of market manipulation in the gold market, which can distort prices and create risks for traders.

Ultimately, there are alternatives to gold that offer decent returns in the short term and can be used to hedge against inflation. The best alternatives to gold also help diversify trading portfolios and spread risk across different instruments.

So, what are the top alternatives to trading gold?

Silver

One of the most popular alternatives to trading gold is silver. This is another precious metal that is often closely correlated to gold, however it is less expensive and can experience higher volatility, making it popular with active traders. The lower price point, in particular, makes it accessible to retail traders.

Trading silver can also provide diversification opportunities. While gold and silver are both considered safe-haven assets, silver has some different market drivers, including its industrial uses spanning electronics, solar panels and medical equipment.

Silver can also be used to hedge against inflation, but it is most effective in the long term. It is not necessarily an effective hedge over the course of several months or a few years.

Ultimately, trading silver alongside gold can help reduce a portfolio’s overall risk.

Oil

Oil is one of the most actively traded commodities and is closely tied to global economic growth. It is also correlated to gold over the long term, with prices moving together more than 60% of the time.

Oil is a highly demanded commodity, with transportation, manufacturing, and energy production applications. This means that a range of factors, such as changes in global economic conditions, geopolitical events, and supply and demand imbalances can impact the price of oil.

This can create volatility and trading opportunities for retail traders. For instance, the price of oil climbed to over $120 after Russia invaded Ukraine in 2022 before sliding as the global economy faltered and oil prices slumped.

However, it is worth noting that the price of oil can be impacted by environmental, social, and governance (ESG) concerns, which may affect the overall demand for oil in the long run.

Platinum

One of the best alternatives to gold trading is platinum. This is a widely used industrial metal with applications in the automotive, chemical, and electronic industries. It is less commonly traded than gold and silver but can offer unique trading opportunities for those who understand its supply and demand dynamics.

The price of platinum is often more closely tied to the health of the global economy and industrial activity than the price of gold. As a result, trading platinum can provide exposure to a different set of market drivers than gold.

Platinum is also rarer than gold, which means supply is more limited. This scarcity can make platinum prices more volatile than gold, creating trading opportunities for those who track demand and supply in key geographies, such as South Africa, which produced 140 metric tonnes of the metal in 2022.

The price ratio between gold and platinum (how much platinum you can buy with gold) also fluctuates significantly over time, ranging from 0.85 to over 1.3 in the last three years, notably higher than historical averages. Savvy traders can take advantage of fluctuations by buying and selling platinum relative to gold.

Agriculture

Agricultural commodities, such as corn, wheat, soybeans, and cotton, are also good alternatives to trading gold.

There is always a demand for agricultural commodities due to their essential nature in providing food and fuel. This demand is also not limited to one region or country, which means that agricultural assets can be traded globally and provide exposure to a range of markets and economies.

Seasonal factors, such as planting and harvesting seasons, weather patterns, and supply and demand imbalances can impact the prices of agricultural commodities. In recent years, for example, the price of corn has been hit by droughts in Brazil and a reduction in production due to the Russia-Ukraine conflict, who combined account for around a quarter of corn and wheat exports globally.

Cryptocurrency

For traders seeking higher profit potential in return for greater risk, cryptocurrencies can be good alternatives to trading gold.

Cryptos are known for their high volatility, which means that they can experience significant price swings in a short period. This volatility can create opportunities for traders to make profits quickly.

Bitcoin, for example, sank by more than 60% in 2022 while its value fell by 5% in just one hour on 3 March 2023 amid concerns about digital asset bank, Silvergate Capital. While gold can still be volatile, it tends to experience more gradual price changes in comparison.

Cryptos are also often more accessible than trading gold. While gold can be purchased through physical means like bullion, digital currencies can be bought, sold and traded at a range of crypto brokers and exchanges. There also exist crypto indices and synthetic products, not to mention hundreds of tokens to speculate on.

On the downside, cryptocurrencies are largely unregulated and the industry has been home to bad actors in recent years, as demonstrated by the high-profile collapse of FTX in 2022. As a result, cryptos are a high-risk alternative to gold trading.

Final Word On Alternatives To Trading Gold

There are several popular alternatives to trading gold for retail investors. These include silver, platinum, oil, agricultural commodities, plus cryptos for traders seeking high-risk, high-reward trading opportunities. The best alternatives offer portfolio diversification, a hedge against inflation and potentially higher returns than the safe-haven nature of gold.

Register with one of the best brokers with alternatives to gold to start trading.

FAQs

Should I Trade Gold?

Gold trading has been popular for hundreds of years. It is widely traded, can be used as a hedge against inflation, and is available at many top brokers. However, its status as a safe-haven asset means returns can be relatively low compared to other commodities and assets. As a result, many traders turn to alternatives to gold trading, including those outlined in this guide.

What Is The Best Alternative To Trading Gold?

Popular gold alternatives include silver, which has a lower price point and often more volatility, making it suitable for a short-term trading strategy. Other alternatives to trading gold include platinum and oil.

How Can I Trade Alternatives To Gold?

Firstly, decide which asset you want to trade, whether that’s alternative metals, soft commodities or volatile cryptocurrencies. Next, sign up with a trusted broker and make a deposit. You can then download and/or sign into the trading platform to make a trade.

What Are The Benefits Of Trading Gold Alternatives?

Trading alternative assets can bring portfolio diversification capabilities, potentially higher returns, and a way to hedge against inflation. Gold is also relatively expensive compared to other metal options like silver, which can deter beginner traders, although the best brokers offer leveraged derivatives like CFDs.