Why Invest in Commodities?
Hedging : price risk management Commodity derivatives is an effective tool
for producers, consumers, suppliers etc of the related commodities to hedge their
risk and protect themselves against unexpected and uncertain volatile price movements
by monitoring commodity news and commodity charts. They can hedge raw materials/
finished goods and/or inventories: e.g. A gold jeweler may buy future contracts
and fix his cost price of buying gold which would be used to make jewelry.
Direct exposure: The commodity derivatives market offers an alternative to
directly trade in commodities rather than in the companies that deal in those commodities.
Simple analysis: It is much simpler to understand the impact of major economic
factors that affect the commodities prices thereby making it easier for the trader
to take a holistic view on the market, based on one’s analysis about the economic
data, demand, supply etc. As compared to forecasting the price of the shares of
a company which depend on various factors beyond demand and supply of the products
they manufacture and sell. Commodity trading and price forecasting also can get
a lot more efficient based on simple technical chart patterns and analysis
Leverage: small investment & bigger return potential: Derivatives, being
a leveraged product , require only a small sum of money to enter into contract there
by making the return on investment potential high in case of a profitable view these
derivatives can be seamlessly traded/executed through our efficient online commodity
Portfolio diversification: For investors, commodity trading can also be an
attractive and alternative asset class to diversify their portfolios in order to
bring some stability to the portfolio. Commodity prices especially gold has been
observed to have an inverse correlation with the stock markets, and the us dollar
indicating that it is an asset looked upon as a safe haven against financial, economical
and geo - political tensions. . It is also considered as an alternate currency and
a hedge against inflation.