Gold And Oil Commodities Trading
The recent weakness of the US Dollar has certainly helped bolster the commodities futures markets
. With most commodities, like Gold and Crude Oil, priced in dollars, any dollar weakness can help boost the commodity prices.
Gold has shot up to $1,100 level. Whilst the price may have gone a bit too far, too quickly, the trend is firmly in favour of the bulls. Of course, if there is any currency strength it could quickly return the $900 level.
Oil, is a different kettle of fish. When the price hovers around the $70-$80 level then it is firmly at the price level that OPEC is looking to achieve.
There is some pressure though on the oil market to continue higher. Forecast price upgrades have been released by both the US Energy Department and Credit Suisse. Both forecasts point to higher prices through 2010, citing the main drivers as rising demand and falling inventories.
However, it is not a clear one-way bet. If the US Dollar finds some strength then that could weaken the oil price.
What should an investor do? First they should note that all forms of speculation or investment, from trading stocks and shares to having a pension to buying a house, have a negative side.
Spread betting does provide some interesting opportunities with both the
oil spreads and the gold markets. Note though that if you spread bet you can lose more than you initially staked.
A simple advantage of
financial spread betting is the wide range of markets on offer. These include oil, gold, stocks and shares, currencies and stock markets like the FTSE 100 or Dow Jones. You can generally trade all these from the same account.
Also with oil and gold looking volatile then spread bets let you trade a market in both directions. You do not have to bet on markets to increase. If you think the price of crude oil will go up you can bet on it to go up. If you think the price of gold will go down you can bet on it to go down.
As mentioned, investing does have its risks but there are a few steps you can take to reduce your potential downside. You can add a Stop Loss to your trades. So if a market moves against your position then the stop loss will close your spread bet and stop you losing any more money.
Note though that spread bets carry a high level of risk so you should only speculate with funds you can afford to lose. Before trading, please ensure that spread betting matches your investment objectives, familiarise yourself with the risks involved and, if necessary, seek independent advice.
by: Robert Thomas
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