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Gallium investment and trade
Gallium metal is a silvery metal that can be used in various high-tech applications, including the production of high-end semiconductors.
While gallium is not a widely traded commodity, it is possible to invest in products or in gallium-related stocks, futures contracts, and mutual funds that we will go deeper into.
Trading and investing in gallium depend on your investment strategies. We will tell you more about the possibilities in this article.
The price of gallium typically depends on supply and demand, as well as the demand for its applications. Additionally, other factors such as changes in currency rates and political policies can also influence the price.
The graph on this page will show you historical context, current prices and the trend that this raw material has undergone.
What to know before trading in gallium
It is important to have background information on the raw material of your choice, before you trade in them, because it gives traders important information about the market. This can include fundamental and technical analysis, supply and demand dynamics, geopolitical events, and market sentiment.
Knowing these details helps traders make better informed decisions, spot potential risks, and identify areas where they may be able to gain an advantage. Having this information can also help improve the trader’s positioning and timing when entering into a trade.
Supply and demand
When trading or investing in raw materials, such as gallium, supply and demand is the fundamental mechanism used to determine stock prices. Stock prices rise when demand is greater than supply as investors are willing to pay more for the stock.
Alternatively, stock prices fall when supply is greater than demand as investors are not willing to pay as much for the stock. Typically, demand for stocks increases when the raw material’s underlying fundamentals are strong or when investors believe the stock price will appreciate in the future.
As a result, savvy stock traders are always aware of factors influencing demand and supply to make educated trading decisions.
Use of gallium
It is important to know what gallium is used for, to understand where the supply and demand come from.
Gallium is primarily used in the semiconductor industry because it has properties making it suitable for use as a gate material in transistors, as a dopant in the production of integrated circuits, and as an alloy in the production of high-efficiency radio frequency amplifiers. Outside of the electronics industry, gallium can be used as a catalyst in organic synthesis and a performance enhancer in metal casting.
Production of gallium
The amount of gallium produced globally is not known as it is a by-product of other processes and not generally produced in large quantities, according to the US Geological Survey.
Gallium is produced commercially by electrolysis of the hydroxide in potassium- or aluminum-based solutions. It is also extracted as a by-product of refining bauxite for aluminum.
Primary producers of gallium include China, Russia, Japan, Kazakhstan and France.
Trading and investing in gallium
Investing in gallium can be done through several different avenues, including purchasing physical gallium, investing in gallium mining companies, and buying shares of gallium futures contracts.
Physical gallium can be purchased in various forms including ingots, bullion and coins. However, it is a relatively rare element and is difficult to acquire.
This is obviously an easy, but most likely more expensive way of investing in this raw material. The main problem with this way of investing is reselling to gain a profit.
Investing in mining companies
Investing in mining companies is a more direct way to gain exposure to gallium. Many companies specialize in mining, producing and selling the metal.
Additionally, investors can buy shares of public companies that produce gallium or invest in ETFs or mutual funds with exposure to the metal.
Investing in these companies allows investors to benefit from increases in the overall demand for the metal, as well as from company-specific events such as mergers, acquisitions, and funding announcements.
Commodities traders can also engage in gallium futures trading. Futures contracts are agreements to buy or sell a set quantity of a given commodity at a specified future date and price.
This can provide leverage and potential profits, but can also carry high risks if the price of the commodity changes unexpectedly. Therefore, before engaging in futures trading, it is important to research and understand the risks involved.
These contracts are traded on the Chicago Mercantile Exchange or the London Metal Exchange, and allow investors to speculate on the direction of pricing for the metal.
The right way of investing in gallium
The average gallium investor invests in it for a long term gain. Generally, when investing in gallium, investors will look to capitalize on the expected price appreciation in the market by investing in a well-established producer or prospector with existing proven resources.
Since gallium is currently very rare and is not widely traded, investing in gallium typically requires in-depth analysis of the specific company that produces or prospect for it or understanding of its other uses, such as production of low-grade trading chips or computer parts.
Furthermore, since there are generally fewer opportunities to invest in gallium, someone interested in investing in gallium should look beyond traditional instruments (like stocks and bonds) and investigate more specific opportunities, such as private equity investments in junior miners, or in more speculative ventures, such as hoping to find a reserve in a remote area.
Since the investment possibilities are far and wide, the amount of investment varies also based on the budget of the trader. It is not recommended to ’put all your eggs in one basket’, when it comes to gallium.
Gallium prices have been relatively stable since the late 2000s, with annual averages oscillating around US$1.50/kg.
However, the market saw a significant spike in the second half of 2018 due to increased demand from the electronics and automotive industries, with the average annual price reaching US$3.00/kg by the end of that year.
Prices cooled in 2019, as a result of diminished demand, but they remained higher than in previous years.
In 2020, gallium prices once again experienced a rapid increase as a result of strong demand from the solar industry, rising to nearly US$5.00/kg by mid-year.
However, the prices have since leveled out and remain slightly higher than pre-2018 levels.
Is gallium a good investment for trading?
Gallium is not typically considered a top-of-the-line investment, since its main uses are in the fields of semiconductor manufacturing, research and aerospace. While demand for the metal has been rising due to its use in consumer electronics like smartphones and LED lights, it is still too new to be seen as a reliable long-term investment.
Additionally, gallium is a very expensive metal, like investing in opals, so investing in it could be risky and difficult for the average trader. Furthermore, its price is subject to rapid and unpredictable fluctuations due to its limited supply and increasing demand.
Therefore, it is better suited for experienced traders and investors who understand the risks involved.
One way for the average trader to take use of the gallium investment, is finding investment in mining companies or stocks that leverage the long-term potential. This third-party yield approach has its own risks, but is a great fit for the average investor.