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Commodity or commodity trading instrument has always been excellent for most global investment managers. Automatically capital turnover that occurs in the commodity market is quite competitive.
Commodities can be interpreted as something substansially physical, such as agricultural and mining. Where an investor or trader may make purchases or sales through both futures and spot markets. This instrument is one of a small number of investment instruments, in which participants who have little capital to get involved and reap huge profits in a relatively short time.
However, as a commercial commodity trading has a high reputation in the level of risk, particularly for individual investors. In fact, the risk of trading in commodity market will not be much of a risk you have defined yourself. The rest is a matter of risk of price movements, which tend to be the same as the risk of asset price movements such as stocks or bonds.
All you need to do is to identify and monitor the factors that drive prices, such as taxes, inflation, interest rates, weather, transportation and technology costs, each of which has a different effect on each commodity.
Generally, the commodities are divided into two, the first commodity hardware which generally is the result of mining such as gold, silver, oil, and other commodities on earth, have limited resources and generally require high resources and funds to acquire them. The second is soft commodities which are agricultural products such as sugar, cocoa, coffee and others. Table 1 gives a detailed example of the commodity.
Table 1: Types of commodity
Because many types of commodities are traded in the world market, our focus in this book is limited only to the portion of the hard commodities such as gold, silver and oil. These instruments can be traded on the spot market, futures or options, in general, have been shaped into contracts that can be traded more easily.
History records that metal already has a high value since immemorial time. Especially precious metals such as gold and silver which for centuries have been the medium of exchange in trade transactions. Including international trade, before coined money occurs as it is physical.
The high value of the metal in the eyes of the world still survives to this day. Gold and silver are still considered by most investors as a land investment that continues to shine.
Commodity futures contracts as well as the precious metals commodity futures contract that contains forward delivery agreement at a specified price. This contract has been formally standardized by the world body in size, quality, time and place specified.
As with other commodities, gold and silver can be traded in the form of spots or option 24 hours a day.
How to invest in gold
Through the development of technology and commodities trading, gold can be invested in various ways. As well as the wide range of products such as, Gold Bullion, Gold Certificates, Gold Accounts, Gold Exchange Traded Funds (ETFs), Gold and Gold Mining Shares Mutual Funds.