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Tag: Precious Metals
How to Invest in Gold
How to invest in gold and key price drivers
Article updated on May 20, 2020
How to invest in gold and key price drivers
LONDON (Reuters) – Gold surged to a record above $1,500 an ounce on Wednesday as dollar weakness and a rise in oil prices added to fear-driven buying on the back of uncertainty over eurozone stability and U.S. growth.
The following are key facts about the market and different ways on how to invest in Gold.
HOW DO I INVEST?
SPOT MARKET
Large buyers and institutional investors generally buy the metal from big banks.
London is the hub of the global spot gold market, with more than $26 billion in trades passing through the city’s clearing system each day. To avoid cost and security risks, bullion is not usually physically moved and deals are cleared through paper transfers.
Other significant markets for physical gold are India, China, the Middle East, Singapore, Turkey, Italy, and the United States.
Find Out Why Countries & Governments Are Buying Gold
Russia continued to official gold reserves to fulfill the goal of boosting the Russian Federation’s national security. Given this statement, there should be no doubt that Russia views gold as an important monetary and strategic geopolitical asset.
FUTURES MARKETS
Investors can also enter the market via futures exchanges, where people trade in contracts to buy or sell a particular commodity at a fixed price on a certain future date.
The COMEX division of the New York Mercantile Exchange is the world’s largest gold futures market in terms of trading volume. The Tokyo Commodity exchange, popularly known as TOCOM, is the most important futures market in Asia.
China launched its first gold futures contract on Jan. 9, 2008. Several other countries, including India, Dubai, and Turkey, have also launched futures exchanges.
EXCHANGE-TRADED FUNDS
Media coverage of high gold prices has also attracted investments into exchange-traded funds (ETFs), which issue securities backed by physical metal and allow people to gain exposure to the underlying gold prices without taking delivery of the metal itself.
Gold held in New York’s SPDR Gold Trust, the world’s largest gold-backed ETF, rose to a record high of 1,320.436 tonnes in June 2010. The ETF’s holdings are equivalent to nearly half of the global annual mine supply and are worth some $59 billion at today’s prices.
Other gold ETFs include iShares COMEX Gold Trust, ETF Securities’ Gold Bullion Securities and ETFS Physical Gold, and Zurich Cantonal Bank’s Physical Gold.
BARS AND COINS
Retail investors can buy gold from metals traders selling bars and coins in specialist shops or on the Internet. They pay a premium for investment products of 5-20 percent above spot prices, depending on the size of the product and the weight of demand.
KEY PRICE DRIVERS:
INVESTORS
Rising interest in commodities, including gold, from investment funds in recent years has been a major factor behind bullion’s rally to historic highs. Gold’s strong performance in recent years has attracted more players and increased inflows of money into the overall market.
FOREIGN EXCHANGE RATES
Gold is a popular hedge against currency market volatility.
It has traditionally moved in the opposite direction to the U.S. dollar as weakness in the U.S.
The unit makes dollar-priced gold cheaper for holders of other currencies and vice versa.
This link sometimes breaks down in times of widespread market stress, however, as both gold and the dollar benefit from risk aversion.
Their ratio turned positive in late 2008 and early 2009 after the crisis following the Lehman Brothers’ failure.
Despite another drop in the usual strong correlation between gold and the euro-dollar exchange rate, the currency market still plays a major long-term role in setting gold’s direction
Analysts say gold’s strong performance last year was largely driven by concerns over the stability of all currencies, though primarily the dollar, as major economies have moved to dampen strength in their currencies to safeguard exports.
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Global Investing Strategies
Different Investment Methods
Trade Spot Gold Online
Trade Oil Online
Trade Commodities Online
Commodity Market and Commodities Exchange
Commodities exchanges usually trade futures contracts on commodities, for example, in a certain month, A farmer raising corn can sell a future contract on his corn, which will not be harvested for several months, and guarantee the price he will be paid when he delivers; a breakfast cereal producer buys the contract now and guarantees the price will not go up when it is delivered. This protects the farmer from price drops and the buyer from price rises.
Trade Oil Online
Updated May 20, 2020
Trade Oil Online
With the price of oil skyrocketing (the price recently increased by 14% in a single week), you may be wondering if now is the right time to invest in this commodity.
There are plenty of ways to get in on the oil industry. For example, you can buy stocks of oil and drilling companies. But one of the most profitable – and riskiest – investments you can make is in oil futures.
The energy sector has been a disaster zone this year, as the coronavirus pandemic has decimated global oil demand. West Texas Intermediate, the benchmark U.S. crude, has plummeted nearly 70% to a recent $19.21 a barrel, while Brent, the most popular international benchmark, is down 60%, to $26.34. Most oil and gas producers, including the majors, will lose money in 2020 or barely eke out a profit, and most of those still paying dividends will have to borrow to cover the cost. As for energy stocks, they have made fools of their fans for nearly a decade and now account for a measly 3% of the S&P 500 index.
Yet, the members of Barron’s 2020 Energy Roundtable see glimmers of hope for this beleaguered sector—and long-suffering investors—even though things could get worse before they get better. The painful steps that energy companies are taking to reduce supply and conserve cash are likely to pay off in higher oil and gas prices over the next two years—and stronger operations and balance sheets for the industry’s survivors. Emblematic of recent moves, Royal Dutch Shell (ticker: RDS.B) slashed its quarterly dividend on Thursday by 66%, to 16 cents a share from 47 cents, its first cut since World War II. And on Friday, Exxon Mobil (XOM) reported its first quarterly loss in decades.
Our 2020 Roundtable panelists include Phil Gresh, an energy analyst at J.P. Morgan; Bernadette Johnson, vice president of strategic analytics at Enverus, a data and analytics provider to the energy industry; Patrick Kaser, a portfolio manager specializing in large-cap value stocks at Brandywine Global; and Robert Thummel, a senior portfolio manager at Tortoise, which invests in “midstream” companies focused on energy transportation, storage, and marketing. The consensus among the group is
that oil prices could double in the next year or so, to about $50 for Brent, as the global economy reopens and crude supply and demand ease back into balance.
“ For companies to produce oil profitably, Brent needs to trade around $50 a barrel. ”
Barron’s conducted the 2020 Energy Roundtable in mid-April via Zoom, and followed up by phone with the panelists to get their read on ever-changing market conditions. Oil prices, for one, perked up last week, with June WTI futures jumping 25% on Thursday, while many energy stocks have rebounded by 40% or more from their late-March lows. Even so, our panelists consider stocks such as Chevron (CVX), ConocoPhillips (COP), Valero Energy (VLO), and Williams Cos. (WMB) compelling buys at current prices.
Patrick Kaser: There is an assumption that anyone looking to invest in energy stocks, and oil stocks in particular, is an idiot. [Laughter] That assumption appears pretty reasonable—if you’re looking in the rearview mirror. What will it take for the group to do well? Over the long term, things will normalize. In January, the industry was on a path to a pretty good environment. Brent crude was trading in the $60s. Supply and demand looked reasonably balanced, and excess capacity was lower than it generally had been in the past 30 to 40 years. We think things will get back there, but the timing is uncertain. The stocks have been destroyed. There will be survivors that come out on the other side looking stronger. Their shares are pretty attractive right now.
Phil Gresh: If you rewind the clock to December, companies with the right cost structure could thrive in a $60 Brent environment. They could cover their dividends fully. Oil companies were buying back stock with excess cash flow. They could compete with the S&P 500 on a cash-flow-yield basis—and then the oil price had a tumultuous drop.
Source: Bloomberg
Source barrons.com Read More…..
How to trade Oil online Crude Oil trading is performed in the same way as FX or Foreign Currencies Trading Oil Is King – More people trade oil than any other commodity. Its importance in the world and demand is increasing due to China and India becoming increasingly important to the world economy. You can trade oil futures using options and commodities from anywhere there is a computer with internet service. Trading commodities like (Gold, Silver, Metals) or Dow futures is exactly the same as trading Forex Many Forex brokers also allow you to trade oil, gold and the Dow. Forex is mostly traded on the MetaTrader 4 platform and this often includes these instruments without people realizing. Most MetaTraders have all sorts of additional instruments, often shares and sometimes even including the DOW. To reveal these, you need to right click in the Market Watch window (where the currency pairs are displayed) and click on ‘Show All’. Trading, as opposed to buying shares, allows two big advantages. The first is that you can profit from falling prices just the same as rising prices, by selling first rather than buying. The second is ‘leverage’ which allows you to buy huge quantities with just a small deposit. You can make a profit from a small move up or down in price. This is potentially risky but like Forex Trading you always put in an automatic ‘stop loss’ to close the trade should the price move against you by a set amount. You can also put in an automatic ‘limit’ to close the trade. You can place the trades anywhere you like, including spread betting. The amount of capital you require varies from broker to broker but most will trade mini contracts but you need a minimum of a thousand dollars in your account. You can start trading with $100 (it is called micro account) but it is not a good idea! Futures prices are estimated price for delivery at a set date in the near future.
Here is how a typical trade for crude oil works. We see that the quoted price is 71.50 – 71.56 so this means that we can buy at 71.56 oil and sell at 71.50 – the difference in prices being the broker’s profit. In conclusion, trading oil for a living is not only fun but a profitable and flexible way to make income online.
A. Dababneh