As food prices in the world continue to soar, as geopolitical tensions in the middle and far east continue to surface and as global weather disasters continue to attack, betting on commodities has never been more exciting…
What are the Main Commodities?
The two giant and most popular assets in this area are Crude Oil and Gold. Lets start with Crude Oil. Worth mentioning is that Crude Oil comes in the form of several different contracts traded on several different exchanges, but for simplicity purposes we are going to just mention two, WTI (West Texas Intermediate) and Brent Crude (Oil from the North Sea). The most popular one and by far the most talked about is WTI, so when you hear about oil prices, in most cases than not the asset in focus is WTI Crude Oil.
There are many reasons why the price of Oil is so carefully monitored and spoken about. Some of the most obvious ones are that the price of oil has a direct effect on petrol prices, energy prices to heat our homes and the price you pay for your food, clothes and your next plane ticket. But furthermore, the price itself can also tell you as to the overall health of the US and Global economy in general. To sum up, when Oil prices are rising, demand for the black stuff increases which is a signal that there is growth in certain economies. When prices are falling however, it is usually a signal that demand has decreased and that the main global economies are experiencing a slowdown in growth.
Always bear in mind, that trading commodities is a different ball game to trading stocks or bonds in that there are many more factors that can influence its price. For instance, weather, storage and delivery etc… such circumstances do not occur in the stock markets or fx markets so remember to keep an eye out for announcements and figures that can influence supply and demand. On the flip side and back to the original point discussed, because prices can turn volatile on the flip of a coin, there are many opportunities to catch some great moves when you decide to bet on commodities. (A daily move of in oil is the equivalent of 300 points when your spread betting! Even at per point, that is a swing of 00 in one day’s trading session.
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