Investing In Commodities
Author: Ahmad Hassam
Commodities have always be considered to be inferior as an investment. But in the last few decades, the world of commodity trading has seen many people getting rich. Commodity trading is no longer consider to be an inferior asset class. Rather, commodity investing is becoming popular. Commodities prices have been skyrocketing with commodities like gold, silver, oil, wheat,cotton and others hitting the all time historical highs in the last decade. Gold just breached the historical barrier of $1200 per troy ounce in the last few months of 2009. Crude oil prices jumped from around $60-70 in the summer of 2008 to more than $140 per barrel in a matter of few months. It is being said that the 21st century belongs to Commodity Trading!This boom in the commodity prices is going to continue for many decades. Commodity trading is going to make many investors and traders rich in first half of the 21st century. Fundamentals for commodity market are strong. With Brazil, Russia, China and India (BRIC) developing at a fast pace and other countries joining the rank of the emerging economies, demand for commodities will be a all time high for many decades.You don't have to just invest in crude oil futures or gold futures to benefit from this boom in the commodities. You can invest in ETFs, buy precious metals ownership certificates, invest in Master Limited Partnerships or invest in companies that process commodities such as uranium. Commodities markets are global in natures and so are the investment opportunities.Master Limited Partnerships (MLPs) that invest in energy infrastructure like pipelines and storage facilities are a unique investment as they are traded publicly like a corporation but they offer the benefits of a partnership. Unlike Corporation that are taxed two times, MLPs are not taxed and they pass on their income to shareholders tax free. You will be only taxed on individual basis if you invest in an MLP. An MLP's primary responsibility is to pass on all the cash flow directly to shareholders, you can afford not to invest in MLPs.Energy drives the global economy. Oil supply has reached its peak. In the coming few decades, the supply of oil is going to dwindle. This is making many governments to switch over to nuclear energy. Demand for nuclear power is rising as it requires one time heavy investment after that no or little investment. Uranium drives these nuclear power plants. Demand for uranium in the global economy is on the rise. This is making uranium prices go up and up. It went from around $10 in 1994 to more than $40 in the last decade. This uptrend in the uranium prices is going to continue for a long time. You can profit from this uptrend in the uranium prices by investing in uranium mining companies.As more and more investors and traders flock towards commodity trading, exchanges that provide futures contracts, options and other derivatives to commodity traders have seen their stock prices rise! The Chicago Mercantile Exchange (CME), one of the largest commodity exchanges has seen its stock price rise from $40 in 2003 IPO to almost $500 in 2006. This performance was even better than GOOGLE. With the global economy out of recession, this price is again going to shoot up. This is the best time to start commodity trading!
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard. Download this Ultimate
Swing Trading Software that works for forex, stocks and furtures FREE. Learn
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