The first organized exchange for commodities trading dates back to Amsterdam in 1530.
There is a range of commodities available for short term and long term investors to trade at the click of a mouse with several online brokers.
Investors can choose from agricultural commodities such as corn, soybean, and wheat. Commodity trading extends to the energy market, in the form of oil and gas trading, and metal markets (like gold and silver).
“Investors can choose from agricultural commodities such as corn, soybean, and wheat. Commodity trading extends to the energy market, in the form of oil and gas trading, and metal markets”
WEALTH TRAINING COMPANY
But it is the latter precious metals, particularly gold and silver, which is particularly popular, especially today in the era of near-zero interest rates on deposit accounts, massive stimulus, and currency printing by the central banks.
Commodity bulls believe that we could be entering another commodity super-cycle, which is hard to believe in this era of rolling lockdowns.
We do believe that commodities trading investing, particularly in precious metals are likely to be a wise hedge against the coming currency debasement.
Concerning commodities trading, let’s take a look at how an investor could get exposure to the precious metals market
So, an investor could either buy the physical metal through a bullion dealer and either store the silver or gold at home or with the bullion dealer. In this case, there would be storage and insurance costs.
“We do believe that commodities trading investing, particularly in precious metals are likely to be a wise hedge against the coming currency debasement”
WEALTH TRAINING COMPANY
Another option for retail investors is to open an online broking account with a broker that offers commodities trading.
Online brokers contract for differences (CFD) accounts, which is an arrangement made in financial derivatives trading where the differences in the settlement between the open and closing trade prices are cash-settled.
“Typically, one buy silver CFD contract is measured in one LOT, which is equivalent to 5,000 troy ounces” – Wealth Training Company
How would commodities trading work, regarding investing is silver?
Let’s say investors take a bullish view on silver, believing that its price will rise in the medium long term.
For example, the investor wants to buy approximately $50,000 US dollars worth of silver. Like most commodities silver is sold by weight. So, one troy ounce of silver is valued at 24 US dollars. But the investor decides that they don’t want the burden, the expense, and the risk of storing the precious metal. Moreover, the investor wants to take advantage of margin trading, so they decide to invest using CFDs with an online broker.
Typically, one buy silver CFD contract is measured in one LOT, which is equivalent to 5,000 troy ounces, so the deal size of one buy silver CFD would amount to 120,000 USD (5,000 multiplied by 24 USD spot silver per ounce)
So the investor would need to buy an increment of A LOT, in other words, a fraction of one LOT CFD.
So, in this example, the optimistic silver investor who decided to invest 50,000 USD in silver, he/she would need to buy 0.4 CFD Buy Silver, a deal size of 48,000 USD.
Here is the two-step calculation, so 0.4 of 1 LOT equals 2,000 troy ounces, and with a silver spot at 24 USD, at the time of writing this piece, the deal size, or investment is worth 48,000 USD.