Some of the hottest action in financial markets over recent years has been in commodities. Many fuels, metals, and agricultural products have experienced enormous price swings. Crude oil, for example, shot up by over 50% in the first seven months of 2008, before collapsing by 75%. This is illustrated in the chart below. Such movements have created exciting opportunities for traders.
Movement of brent oil
Commodities are the raw materials used for things like food, clothing, power, construction and industry. With Tradefair Spreads, you can speculate on a variety of these goods. As well as mainstream products - like Crude Oil, Gold and Copper - you can also trade platinum, lean hogs, and carbon emissions.
Commodities are mainly dealt through futures contracts. These are agreements that trade on special exchanges. For example, the seller of a futures contract might agree to deliver 1,000 barrels of oil to the buyer in six months' time at a price of $55 per barrel. Spread bets on commodities are based on these futures prices.
Gluts and shortages of commodities play a big part in commodity pricing. A poor harvest might send cocoa prices soaring. Or, copper prices might tumble if it turned out that China had built up an unexpectedly large stockpile of that metal.
Important economic trends also influence commodity prices. A strong global economy often results in rising prices for energy and industrial metals, as industry uses more of these products when times are good. Gold frequently does well during times of nervousness, as investors tend to treat the precious metal as a safe haven.
The information in this article is for educational purposes only, it does not constitute advice and should not be construed as solicitations of any order to buy or sell. Past results are not necessarily indicative of future results.