Commodities are important both in stock trading and the world economy. Have you come across the stock exchanges and brokers which allowed you to trade commodities and precious metals? Today we will talk about these kinds of trading instruments.
Table of Contents
Which commodities and metals are available in trading?
Stock exchanges usually provide you the ability to trade the most in-demand commodities and precious metals. As for commodities, stock exchanges usually provide crude oil and gas. As for precious metals, silver, gold and palladium are usually available for trading.
Role in economy
It’s hard to overvalue the role of commodities and precious metals in the world economy. As for the precious metals, non-ferrous metallurgy is an important part of any country’s industry. Gold and silver are used not only in jewelry, but also in the manufacture of machine tools and equipment, cars, aircraft and ships, including the military, in the construction of residential buildings and industrial buildings. They are widely used in aerospace technologies and mechanical engineering, radio electronics, rocket and nuclear technology, high technology, in everyday life..
As for the commodities, oil and gas are still the blood of the modern economy. They are the basis of energy in many countries.
How to trade commodities & precious metals in the stock exchange?
There are two main ways to trade commodities and make profit in the short time distance – CFDs (Contracts For Difference) and futures contracts. Another way to benefit from it is long-term investments – you can not only buy commodities, but invest in mining gold, oil, gas or other commodities and metals.
Commodities and metals trading – is it safe? Which specifications exist here?
Many traders invest in gold and other precious metals (gold is the most popular one) to diversify their investment portfolios. Investing in gold is considered like a safe long-term investment, especially in the time of crisis. Gold is always in demand, regardless of the investor’s spirits. But precious metals usually have big spreads (difference between buying and selling price) and high volatility (price changing through short periods of time).
As for commodities (crude oil and gas), they also have high volatility, and traders use them to diversify their investment portfolios. Especially they tend to invest in commodities in case of big instability in the market, considering commodities as a safe place for their money.
Trading gold. How to avoid mistakes when trading gold?
There are several ways to buy gold. First of all, you can buy bars by contacting your bank. The disadvantage of this option is the need to pay a big tax. Also if you leave the bars to the bank for safekeeping, you will have to regularly pay for this service.
A more practical method of investment is to open a UMA (unallocated metal account) in one of the reliable banks. This option makes it possible to trade gold online at current quotes. Any individual can open an UMA online or at a bank branch. If you choose the right strategy, then an impersonal metal account can be very profitable.
The disadvantage of UMA is that it is not covered by the deposit insurance program. In order not to lose the money invested, you need to choose a trusted, well-known bank. In addition, the significant difference between the buying and selling rates of the virtual precious metal is
Silver trading is for the thrifty
The popularity of gold for many investors overshadows the possibility of profitable trading in other precious metals. For example, silver. It is distinguished by greater price stability, relatively inexpensive price, as well as the ability to guarantee making a profit from long-term investments. Let’s take a time span from 1970 to the present day. During this time, the price of silver has increased by 700%, and the growth dynamics continues.
Unlike gold, which can be recycled and recovered, silver used in industry is almost irretrievably lost. The total volume of this precious metal in the world is only getting smaller, and its price is growing.
You can buy silver in precious metal bars, in the form of precious coins, or open an impersonal metal account.
Trading oil: how to trade ‘the blood of the economy’
The most popular asset among commodities is crude oil. Oil trading can be done in different ways:
- Through futures contracts concluded on the commodity exchange;
- Under contracts concluded on the so-called over-the-counter market;
- Under direct long-term contracts between a producer and a consumer of oil;
The largest volumes of oil are traded on two stock exchanges:
- New York Mercantile Exchange (NYMEX)
- London InterContinental Exchange (ICE)
Less significant volumes are also traded on the exchanges of Tokyo, Shanghai, Dubai.
Unlike the stock exchange, the over-the-counter oil market does not have a specific location. In fact, the OTC market is a network of brokers from all over the world who, through various types of communication, communicate with each other and conclude deals to buy or sell oil.
If on the exchange market the volumes of traded oil are standardized and usually amount to 1000 barrels in one contract, then on the OTC market you can buy or sell any volumes. It can be two railroad oil tanks or one oil tanker with delivery anywhere in the world.
Oil prices, which are formed in the exchange trading, are widely known and are often mentioned in news reports. Oil prices that are formed on the OTC market are much less known, but, nevertheless, they are also carefully monitored and published by special agencies (for example, the Platts news agency, widely known in narrow circles).
Where to trade commodities and precious metals?
Commodities and precious metals are quite popular trading instruments among brokers, stock exchanges and fintech companies. But we have some favorites to recommend to you.
- Robinhood – a broker with a little entry threshold, whose creators see their mission in democratizing the investments. It enables you to easily trade gold.
- eToro – world-famous social trading service, which gives you access to commodities social trading.
- Dutch Rate – new fintech projects which offers you a lot of trading instruments including a lot of commodities.
We hope you will enjoy using it and trading with these projects!
