Commodities Spread Betting

By mosesbet · Filed Under Spread Betting Comments Off on Commodities Spread Betting 

Commodity Spread Betting

Commodities are markets for natural resources, like gold, coffee, platinum and crude oil.  The commodities markets are generally a lot more active than shares and indices which make them great for trading on. The price of crude oil in 2008 shot up 50% in the first 7 months then fell down 75% in the months later. If you imagine spread betting £1 per point on these sorts of markets then you can end up making a 5,000%+ profit!

The most popular markets for trading commodities includes gold, crude oil, copper, and a few other rare minerals.  Futures tend to do well with gold since everyone knows gold is a stable product whose value always rises – particularly in uncertain economic times.  Because people worry about their savings during bad financial times and are too scared to invest in property, then end up investing in huge amounts of gold (or silver).  This turns the price up, and as such, the market has seen a steady increase in the price of gold per ounces and silver bullions.

Graph showing gold prices over the last 10 years. Prices have virtually tripled since 1999.

Crude oil is becoming a rare resource nowadays.  It is important for energy, construction, transport, and most economies are dependent on it.  That’s why when there is any news of an oil shortage or conflict in the Middle East the price of crude oil (measured in £/barrel) rockets up.  This was seen in the pre-empt of the first Iraq war where the price rocket 90% to its highest ever levels. 

Gluts and shortages of commodities leads to market prices rising.  A poor harvest may lead to soaring cocoa prices, like wise if China suddenly decides to stop exporting certain minerals to Japan because of political conflict than it can cause a sharp rise.  As much as anything, keeping politically aware about these types of things is what will give you an edge trading in the commodities markets.

Finally, the health of the global economy in general will be a key feature in setting the price of commodities.  A booming economy for example will lead to a surge in crude oil prices since manufacturing and construction will be on the up.  As people spend more (on cars, holidays, houses etc) it leads to a greater demand of energy in general.

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