In the week ahead, market participants will turn their attention to key economic events including the US ISM Services PMI, as well as rate statements from the Reserve Bank of Australia (RBA) and the Bank of Canada (BOC). As analysts make their predictions, all eyes will be on these releases to understand their potential impact on financial markets
Switzerland’s Consumer Price Index (5 June 2023)
Consumer prices in Switzerland stalled in April 2023, showing less growth than the 0.2% rise observed in March 2023.
For May 2023 data, which is set to be released on 5 June 2023, analysts expect a 0.1% increase.
US ISM Services PMI (5 June 2023)
The US ISM Services PMI increased to 51.9 in April 2023 from 51.2 in March 2023.
Data for May 2023 is scheduled for release on 5 June 2023, with analysts anticipating a higher figure of 52.1.
Reserve Bank of Australia Rate Statement (6 June 2023)
In a surprising move, the Reserve Bank of Australia raised its cash rate by 25bps to 3.85% in May 2023, after keeping it at 3.6% in April 2023. This marks the 11th time the bank has increased rates in the past year.
The next cash rate will be released on 6 June 2023, with analysts expecting the RBA to hold its interest rate at 3.85%.
Bank of Canada Rate Statement (7 June 2023)
In its April 2023 meeting, the Bank of Canada (BOC) kept the target for its overnight rate unchanged at 4.5% and stated that it would continue to monitor the latest economic data for future decisions on the policy rate.
The next rate statement will be released on 7 June 2023. Analysts anticipate that the BOC will keep its interest rate steady at 4.5%.
Canada Employment Change (9 June 2023)
Canada’s economy added 41,400 jobs in April 2023 due to increased part-time work, the first growth since October 2022. The unemployment rate stayed at 5% for the fifth month, near the record-low of 4.9%.
For May 2023 data, set to be released on 9 June 2023, analysts predict that job creation will dip to 40,000 and the unemployment rate will rise to 5.1%.
Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
Please refer to the table below for more details:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.
If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.
Sydney, Australia, 29 May 2023 – VT Markets, a leading online broker, today announced a record number of new trading accounts secured within the LATAM region. Following its formal entry into Latin America last year, the company has seen a rapid growth in regional clients, reflecting both the LATAM market’s burgeoning potential and the success of ongoing outreach efforts.
Of these efforts, a notable highlight has been VT Market’s recent participation at Money Expo Mexico 2023. Held from 24–25 May 2023, the much-anticipated event saw VT Markets gain thousands of new account sign-ups, consolidating its growing influence both in and around the country.
Responding to the promising trajectory evident thus far, a VT Markets representative stated: “We are delighted to be making such clear inroads into one of our key strategic markets. With the numerous developments taking place in the region, Latin America is uniquely poised for explosive growth, and we want to be at the forefront of the new financial landscape when it emerges.”
Moving forward, VT Markets looks set to continue its expansion throughout LATAM and beyond. With offices already established across Europe, Asia, and the Middle East, the company’s initiatives in the upcoming quarter are expected to amplify its international presence, further reinforcing its status as a truly global broker.
About the Company:
VT Markets is a regulated multi-asset broker with a presence in over 160 countries. Since its inception in 2015, the company has set out to make trading a simple and more accessible experience for everyone. As of today, VT Markets has emerged as one of the world’s top brokers, recently adding a haul of seven awards to its growing list of accolades.
For more information, please visit the official VT Markets website. Alternatively, follow VT Markets on Meta, Instagram, or LinkedIn.
This week’s key economic indicators, including the US Jobs Report and Canada’s Gross Domestic Product, are in the spotlight for the financial sector. These fundamental reports are crucial for traders to navigate the markets and make informed decisions. Stay tuned for the latest updates.
Australia Consumer Price Index (31 May 2023)
The monthly Consumer Price Index in Australia increased 6.3% in the year to March 2023, slowing from a 6.8% rise in the year to February 2023.
The data for April 2023 will be released on 31 May, with analysts expecting a further slowdown, dropping to 6%.
Canada Gross Domestic Product (31 May 2023)
The Canadian economic activity in February edged up by 0.1%, following a 0.6% expansion in January.
For March 2023 data, set to be released on 31 May, analysts expect a 0.1% decline.
US JOLTS Job Openings (31 May 2023)
The number of job openings in the US dropped by 384,000 to 9.6 million in March 2023, the lowest level since April 2021.
Data for April 2023 will be released on 31 May, with analysts expecting another drop to 9.2 million.
US ADP Non-Farm Employment Change (1 June 2023)
Private businesses in the US created 296,000 jobs in April 2023, a significant increase compared to the downwardly revised figure of 142,000 in March 2023.
May 2023 data will be released on 1 June, with analysts anticipating a job creation figure of around 200,000.
US ISM Manufacturing PMI (1 June 2023)
The ISM Manufacturing PMI in the US rose to 47.1 in April 2023, up from a three-year low of 46.3 in the previous month.
Analysts predict that the index for May 2023, scheduled for release on 1 June, will be at 48.
US Jobs Report (2 June 2023)
The US Non-Farm Employment Change unexpectedly increased by 253,000 jobs in April 2023, outperforming the expected 180,000 and coming after a downwardly revised 165,000 in March. Concurrently, the unemployment rate in April 2023 dropped to 3.4%, matching a 50-year low previously seen in January.
For May 2023 data, scheduled for release on 2 June, analysts anticipate that Non-Farm Employment will see an addition of 180,000 jobs, with the unemployment rate projected at 3.5%.
Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
Please refer to the table below for more details:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.
If you’d like more information, please don’t hesitate to contact info@vtmarkets.com
The oil and gas industry encompasses different types of oil, such as crude oil, no-lead gasoline, natural gas, and heating oils. Among these, crude oil remains the largest and most widely traded sector, sourced from various points of origin worldwide.
Due to its extensive trading volume and diverse sources, crude oil is susceptible to geographic, political, and economic factors that make its market highly volatile. This volatility presents both risks and opportunities for traders interested in capitalising on the oil market.
The world’s biggest oil producers (2021) in million barrels per day. source: statista.com, BP
Understanding Oil CFDs
CFDs are derivative financial products that allow traders to gain exposure to a market, such as oil, without owning the underlying asset.
Unlike physical trading, oil CFDs derive their profitability from speculating on price fluctuations rather than the buying and selling of the actual commodity.
Successful trading of oil CFDs requires a deep understanding of market trends, factors driving price movements, and the ability to predict market dynamics.
What Are Oil CFDs?
Oil CFDs enable traders to access the expansive oil market through leverage, offering increased exposure without the need to possess the physical asset.
This increased exposure can diversify investment portfolios and reduce overall risk. Oil CFDs serve as conduits for trading in oil spot prices, oil futures, and oil options.
The most commonly traded benchmarks for crude oil CFDs are West Texas Intermediate (WTI) and Brent Crude Oil.
Differentiating WTI and Brent Crude Oil
When trading oil CFDs, it is important to familiarise yourself with the two primary types of crude oil in the global market: WTI Crude Oil and Brent Crude Oil.
These crude oils are rated based on their density and sulphur content, which impacts their quality and refining costs.
Brent Crude Oil
Sourced from oil drilling in the North Sea
Responsible for setting the price of two-thirds of the world’s traded crude oil supplies
Defined as a light crude oil, but not as light as WTI Crude Oil
Typically refined in Northwest Europe
Brent Crude Oil CFDs are traded over a five-day work week
Brent can be particularly vulnerable to crises and instability because it is relatively more widespread
WTI Crude Oil
Sourced from land based oil fields in Texas, Louisiana and North Dakota
One of the two main benchmarks for pricing of global oil markets, along with Brent Crude
Graded as ‘Texas light sweet’ oil, both lighter and sweeter than Brent Crude
Typically refined in Texas and Oklahoma
Land-based drilling can make shipping and transport of WTI Crude Oil more expensive
International events and instability have less of an effect on price
Traded on the New York Mercantile Exchange (NYMEX)
source: calculatedriskblog
Trading oil CFDs: Key steps
To start trading oil CFDs, it is essential to follow a structured approach:
Step 1. Familiarise Yourself with Live Trading
Choose whether you want to trade WTI Crude Oil, Brent Crude Oil, or both. Practice using a demo account to become familiar with trading tools, indicators, and executing trades in a risk-free environment.
Step 2. Create Your Oil CFD Trading Account
Once comfortable with the trading environment, open a live trading account, download the trading platform, and deposit funds to start trading.
Step 3. Manage Your Risk
Establish risk management strategies, including the use of stop-loss orders and limit-close orders, to control potential losses.
Step 4. Study the Market
Deepen your understanding of the oil market through comprehensive research, including fundamental and technical analysis. Stay updated with breaking news and monitor long-term performance to identify patterns.
Step 5. Formulate a Strategy
Determine whether you prefer short-term or long-term trading strategies and select an approach that aligns with your portfolio and goals.
Step 6. Consider Diversification
Explore other CFD markets and assets to diversify your trading portfolio and mitigate risk.
Step 7. Monitor and Adjust
Continuously monitor your trades, adapt your strategy as needed, and make informed decisions based on the market conditions.
Trading oil CFD futures
In addition to trading spot prices, oil CFDs also provide access to oil futures. Oil CFD futures are over-the-counter derivatives based on future contracts. These contracts allow traders to speculate on the future price of oil at a predetermined date. Trading oil CFD futures involves understanding the intricacies of futures markets, contract expiration, and factors that influence their prices.
source: U.S. Energy Information Administration, Refintiv (Mar 2022)
Pros and Cons of Oil CFDs
As with any trading method, oil CFDs have their own advantages and disadvantages, which you’ll need to weigh up before you get started.
Pros:
Trading oil CFDs requires you to trade with leverage, which means traders only have to place a percentage margin of the full trade value as a deposit. This can give you increased exposure in oil markets and has the potential to maximise your profits.
Oil CFDs give you the chance to gain full exposure to the oil market without needing to take possession of any physical assets.
Trading oil CFDs can be thrilling for investors who want to challenge themselves in volatile markets.
This volatility also opens up more potential opportunities for traders to make a profit.
Cons:
It’s worth noting that oil CFD trading is not permitted in the US and is taxed, unlike other methods such as crude oil spread betting.
Leveraged trading can maximise your profits, but it can also amplify your losses. You should bear this in mind and have a strategy in place for mitigating the risks involved with trading oil CFDs.
The oil market is volatile and requires close monitoring as well as detailed knowledge of your chosen market if you want to trade oil CFDs.
Learn with VT Markets
VT Markets is a provider of comprehensive trading services, offering demo trading accounts using the popular MetaTrader platforms. These demo accounts enable traders to experience realistic trading environments, access powerful trading tools, analyse market trends, and receive professional support. By leveraging these resources, traders can develop their trading style and gain confidence in trading oil CFDs effectively.
The financial sector is poised to closely monitor significant economic releases this week, with particular attention on RBNZ Rate Statement and FOMC Meeting Minutes. These essential reports play a critical role in guiding traders through the markets and enabling them to make well-informed decisions.
Germany, UK and US Flash Manufacturing PMI (23 May)
In April 2023, Germany’s Manufacturing PMI experienced a slight upward revision to 44.5, marking the sector’s poorest performance since May 2020. Meanwhile, the UK Manufacturing PMI was adjusted higher to 47.8, and the US Flash Manufacturing PMI saw a downward revision to 50.2, compared to March’s reading of 49.2.
For May 2023 data, due on 23 May, analysts predict German Manufacturing PMI at 43.6, UK’s at 48.8, and US’s at 50.3.
EU, UK and US Flash Services PMI (23 May)
In April 2023, US Services PMI was revised to 53.6, the year’s largest expansion, while Germany’s reached 56, its fastest growth in a year. The UK Services PMI rose to 55.9, highlighting continuous sector expansion throughout the year.
For May 2023 data, set to be released on 23 May, analysts forecast Germany’s Flash Services PMI at 56.6, UK’s at 54.3, and US’s at 53.
Reserve Bank of New Zealand Rate Statement (24 May)
During its April meeting, the Reserve Bank of New Zealand increased its official cash rate by 50bps to 5.25%, reaching its highest level since December 2008.
For the upcoming meeting on 24 May, analysts predict that the RBNZ will implement an additional 25bps hike, raising the rate to 5.5%.
UK Consumer Price Index (24 May)
The consumer price inflation rate in the UK eased to 10.1% year-on-year in March 2023 from 10.4% in February 2023.
As for the year-on-year CPI data set to be released on 24 May, analysts anticipate a further decline, projecting it to drop to 8.5%.
US FOMC Meeting Minutes (24 May)
The Fed implemented a 25bps increase in its funds rate during its meeting on 3 May, adjusting it to a range of 5%-5.25%. This adjustment represents the 10th hike.
Analysts await the release of the next FOMC Meeting Minutes on 24 May, where they expect to find indications from the Fed about the ongoing tightening cycle. They anticipate the removal of a statement sentence that suggests the need for further policy firming.
US Core PCE Price Index (26 May)
US Core PCE prices, excluding food and energy, experienced a 0.3% month-over-month increase in March 2023, maintaining the same growth rate as the previous month.
The data for April 2023 is set to be released on 26 May, with analysts expecting the same growth rate as March 2023 at 0.3%.
Copper is a widely used hard commodity that finds applications in various sectors, including technology, construction, plumbing, and wiring. While it may be less expensive compared to precious metals like silver and gold, copper’s exceptional properties as a conductor of heat and electricity make it an attractive asset for trading.
Major copper production is concentrated in South America, with Chile and Peru being the primary producers, followed by China as the world’s leading producer of refined copper. However, the global supply of copper can be easily disrupted due to its diverse geographic origins and the involvement of developing countries as key suppliers. This vulnerability, combined with high demand from various industries, contributes to the highly liquid and volatile nature of the copper market.
The Largest Copper Mines in the World by Capacity by elements.visualcapitalist.com
What is Copper trading?
Copper trading capitalises on the market’s volatility and liquidity, offering opportunities for profit through speculation and price fluctuations. However, it’s crucial for traders to be aware of the factors that influence copper prices.
Copper serves as a reliable indicator of global economic health due to its strong connection to infrastructure development. During periods of economic growth, investments in major infrastructure projects drive up the demand for copper. Conversely, economic downturns often result in a decline in copper prices as construction and infrastructure projects are put on hold.
In addition to global economic trends, several other factors impact copper trading prices:
Supply disruptions: Since most copper production comes from developing countries, political, social, or economic upheavals in these regions can quickly disrupt global supply chains. Changes in labour laws or nationalization efforts, as observed in Bolivia in 2006, can lead to significant price fluctuations.
Emerging markets: The rise of new markets with substantial investments in infrastructure development drives increased demand for copper. As these emerging markets experience growth, copper prices tend to rise. Conversely, when growth slows down, copper prices can predictably decline.
Material substitutions: The market rarely tolerates a continuous rise in copper prices. As copper becomes more expensive, manufacturers and investors seek cheaper alternatives to reduce costs. Substitutes like aluminium, nickel, and lead are utilized until copper prices become more affordable. Traders should be cautious of potential shifts in demand caused by material substitutions.
US housing market: The sheer scale of the US housing market plays a pivotal role in copper demand. Copper is extensively used in electrical wiring and plumbing for housing construction. Therefore, when the US housing market experiences growth, copper demand follows suit.
source: Winton, USGS, University of Wisconsin, Forbes, U.S. Federal Reserve, Roskill
Advantages of trading Copper
Traders choose to invest in copper for several reasons:
Safe haven investment: Copper is considered a physical commodity that retains its value even during economic downturns. Consequently, it is often viewed as a safe haven investment alongside assets like gold.
Portfolio diversification: Adding copper to an equity-focused portfolio helps diversify holdings and reduce overall volatility. By including a commodity like copper, traders can benefit from a more balanced investment approach.
Inflation hedge: Copper’s value is not tied to any specific currency, allowing it to retain its worth in the face of inflation. Many traders utilize copper as a hedge against inflation, protecting their portfolios from the eroding effects of rising prices.
Speculation opportunities: The liquidity and volatility of the copper market create opportunities for traders to profit through copper CFDs (Contracts for Difference). While high speculation can yield substantial rewards, it also carries inherent risks.
Getting started with Copper trading in four steps
If you are interested in trading copper, follow these four steps to get started:
Step 1. Select the CopperAsset
While copper bullion and coins can be traded, most copper trading occurs through futures contracts, CFDs, and ETFs. You can choose from various copper futures markets, such as COMEX copper on the New York Mercantile Exchange or LME copper on the London Metal Exchange. Consider the trading hours of different exchanges when monitoring your positions.
Step 2. Choose YourTradingMethod
Copper futures typically involve physical delivery, which may not suit all traders. Derivative products like copper CFDs provide an alternative by allowing traders to speculate on the price difference between opening and closing positions without owning the underlying asset. Copper CFDs offer leverage, enabling traders to trade with a fraction of the total asset value and potentially amplify both profits and losses.
Step 3. Establish a RiskManagementStrategy
Given the potential for magnified losses in leveraged trading, it’s essential to have a risk management strategy in place. Utilise tools like stop-loss orders and limit close orders to automatically close positions when they reach predetermined thresholds for acceptable losses or profits.
Step 4. Open YourFirstCopperTrade
Download a powerful trading platform like MetaTrader 4 or its upgraded version, MT5, to execute trades quickly and gain a transparent view of the market.
sources: Norilsk Nickel, Various sources (Company Data), Statista 2020
Understanding different copper markets
The strategies employed in copper trading depend on the type of market you are dealing with. Generally, two types of markets exist: trending and consolidating.
Trending markets are characterized by significant price fluctuations and volatility. These markets align with the beginning and end of copper market cycles, where increased demand or the completion of large infrastructure projects impact prices.
Consolidating markets, on the other hand, exhibit more stability. They indicate a balance between supply and demand and tend to keep prices within defined support and resistance levels. Despite the relative stability, consolidating markets still offer traders opportunities for profits through short-term movements.
Start trading copper with VT Markets
VT Markets provides a comprehensive trading environment for copper and a wide range of other instruments across various asset classes. Backed by advanced trading tools, in-depth analysis, expert advisors, and technical signals, VT Markets enables traders to open and close copper trading positions effectively.
Whether you are a seasoned trader or just beginning your trading journey, VT Markets offers exceptional client services and the necessary resources to support your portfolio building and trading aspirations.
Gold has long been a highly prised precious metal, known for its lustrous appearance, unique properties, and historical use as a form of currency. While many global currencies were once backed by gold under the gold standard, this system was abandoned in the UK in 1931. However, gold continues to hold value as a stable asset, especially during times of economic uncertainty. With the global demand for gold steadily increasing, investing in or trading gold has become an attractive proposition for many investors.
Step 1: Understanding Gold Trading and Investing
Before you start trading gold, it’s crucial to have a solid understanding of the different types of gold assets available. These assets can involve physically owning the metal or trading it without possession.
Physical Gold
The traditional method is to buy physical gold, which can include gold bullion, coins, or jewellery. However, this option requires security measures, logistics, and insurance, making it more common among banks and financial institutions rather than individual investors.
Spot Price Purchasing
This involves buying or selling gold upfront at the current market price per troy ounce. It allows active investors to gain exposure to gold without physical ownership.
Gold Futures
Futures contracts establish a fixed price for gold and specify a future date for the exchange. Investors speculate on market movements to achieve profitable returns.
Gold Options
Unlike futures, gold options do not require an exchange but provide the option to do so. There are two types: calls (buyers have the right to exchange) and puts (sellers have the right to exchange).
Gold ETFs
Exchange-traded funds (ETFs) are passive investments that track the movement of a basket of shares in gold-related companies. They offer investors broader exposure and portfolio diversification.
Gold Stocks
Investing in gold stocks involves buying shares in companies involved in gold production, mining, funding, or sales. Gold stocks may not always correlate directly with the price of gold, requiring a nuanced understanding of their price trends.
Step 2: Understanding Price Drivers for Gold
To trade gold successfully, it’s important to grasp the factors that influence its price movements. Some major drivers include:
Mining
Gold mining affects the supply of new gold in the market. Although gold can be recycled, it remains a finite resource, and mining activity has slowed down globally. As demand increases and mining reserves dwindle, prices are likely to rise.
Demand
Gold demand has consistently increased over the years, driven primarily by jewellery consumption and gold ETFs. As supply declines, demand becomes a critical factor impacting gold prices.
Global Currencies
Gold often exhibits an inverse relationship with major world currencies, such as the US dollar, Japanese yen, or British pound. When gold rallies against these currencies, it is considered an opportune time to buy gold.
Interest Rates
Interest rate fluctuations affect gold prices. Rising interest rates tend to lower gold’s value as investors shift towards fixed-income assets. Conversely, declining interest rates drive investors back to the perceived security of gold.
Political, economic, and security issues
Gold is considered a safe haven investment during times of market volatility, political instability, financial stress, or global events like the COVID-19 pandemic. These factors can cause significant spikes in gold prices. On the other hand, periods of economic prosperity and positive financial markets may reduce the demand for gold in favour of other assets.
Step 3: Choosing Your Gold Trading or Investment Approach
Based on your investment goals and risk tolerance, select the most suitable method for trading or investing in gold:
Trading: Trading gold allows for maximizing exposure and taking shorter-term positions. Spot trading, gold futures, and gold options are ideal for active traders looking to leverage their investments and hedge their portfolios.
Investing: Investing in gold is geared towards long-term gains and portfolio diversification. Gold ETFs and gold stocks provide exposure to the gold market and are better suited for investors seeking a broader investment horizon.
source: TradingView.com
Step 4: Opening Your Gold Trading or Investment Account
After practicing with a risk-free demo account, you can start trading in live markets by creating a live forex account. Setting up an account with VT Markets is a straightforward process, taking just a few minutes, even for beginners.
Step 5: Identifying Trading Opportunities
With your trading or investment account, you’ll have access to various tools, technologies, and market analysis. Platforms like MetaTrader 4 and MetaTrader 5 offer features to help you identify the right opportunity for trading gold based on technical indicators and market trends.
Step 6: Executing Your First Gold Trade or Investment
When opening a gold trade, it’s essential to manage risk and avoid overexposure. Implement tools like stop-loss orders or limit-close orders to automatically close your trade when it reaches a predetermined threshold. Depending on your strategy and outlook, choose between spot trading, gold futures, gold options, gold ETFs, or gold stocks.
Step 7: Developing Your Strategy and Closing Your Position
Monitor your trade’s profit or loss position using the trading platform’s powerful tools. Stay informed about broader market trends and make informed decisions to close your position at an advantageous point according to your investment and trading strategy.
Ready to Start Trading Gold?
If you’re ready to embark on your gold trading journey, VT Markets is an ideal platform offering exceptional customer service and an intuitive trading platform accessible from your computer or mobile device. Whether you want to learn how to trade gold, access market analysis, or receive Forex signals, VT Markets simplifies the process of market trading. Create your gold trading account today or contact us for further information about our trading tools.
In simple terms, commodities are the raw materials that are harvested, collected, and processed into everyday goods and services used by humans.
Unlike stocks or bonds, commodities are physical materials and goods. Trading commodities can be potentially profitable due to their price fluctuations, but they also carry more risk compared to bonds and the stock market. Successful commodities trading requires specialised knowledge and staying informed about the market.
Before you start trading commodities, you’ll need to choose which commodity you’re interested in. They are typically divided into two categories.
Hard commodities: These are natural resources extracted from the earth, such as natural gas, coal, oil, and precious metals like gold and silver.
Soft commodities: Unlike hard commodities, soft commodities are grown or harvested. Examples include livestock like hogs and cattle (used for food, leather, gelatine) and agricultural crops like coffee, cocoa, wheat, palm oil, and timber.
Commodities trading is one of the oldest forms of trade and is the original basis for what modern investing has become today. The process might have started with farmers negotiating prices for their goods outside of harvest time, but these days, wanting to trade commodities involves a more sophisticated process.
When it comes to trading commodities, there are several options to consider:
Commodities futures
Futures contracts allow investors to buy and sell commodities at a predetermined future price. Profits can be made from the difference between the agreed price and the actual price when the contract expires. However, this approach is based solely on price changes and does not involve the physical goods themselves.
Purchasing physicalcommodities
Some commodities can be physically acquired by investors. However, this option is typically reserved for high-value commodities like precious metals, as it can be more costly compared to other investment methods.
Commodities stocks
Trading commodities stocks allows investors to gain exposure to the commodities market through companies producing the assets. The relationship between commodity prices and stock prices can vary, and it’s essential to understand the underlying principles of each company.
Commodities ETFs
Exchange traded funds (ETFs) offer an opportunity to diversify your portfolio by holding a basket of commodities. ETFs aim to mimic the price movements of the underlying commodities, but they may not always perfectly reflect the actual market conditions.
Iranian oil refinery on fire during the war between Iran and Iraq, 27th September 1980 (Photo by Henri Bureau/Sygma/Corbis/VCG via Getty Images)
Factors that might affectcommoditytrade
To trade commodities successfully, it’s crucial to consider various factors that can influence the market:
Geopolitics: International political situation can significantly impact commodities trading worldwide. For example, the most recent war in Ukraine has affected the grain prices. Or in the past several decades, the political situation in the Middle East has been closely tied to the performance of oil as a commodity.
Domestic politics: Changes in labour laws, regulations, or policies within a country of origin can have a significant impact on commodity prices.
Weather: Weather events such as rainfall, droughts, or extreme temperatures can impact commodity values. Unpredictable weather conditions can disrupt production, affecting supply and demand.
Market competition: Technological advancements and the entry of new competitors can disrupt traditional commodity markets. For instance, the rise of renewable energy sources can affect the demand for fossil fuels.
Seasonality: Soft commodities like agricultural crops and livestock can be influenced by seasonal factors. Harvest and slaughter times can create oversupply or scarcity in the market, affecting prices.
Macroeconomics: Economic indicators such as GDP, inflation rates, interest rates, and industry performance can have a significant impact on commodity prices.
Other environmental factors: Commodities are susceptible to disruptions in the supply chain caused by unforeseen events. Natural disasters, accidents, or shipping disruptions can affect commodity markets. Events like the 2021 Suez Canal obstruction, in which the Ever Given blocked the crucial shipping route for six days, is one such example of this.
Building a strong portfolio with trade commodities
Commodities trading offers unique opportunities but also carries higher risks. Many investors choose to allocate a portion of their portfolio to commodities trading, typically around 20%. This helps balance risk and potential gains while diversifying their investment portfolio.
Ready to create your commodity trading account?
If you’ve been following a commodities market, buffing up on your knowledge of political and environmental factors that might affect it and reading expert insights from financial journalists, you may be eager to open a commodity trading account. At VT Markets, we offer beginner-friendly and globally recognised trading platforms in a user-friendly interface, so you can trade commodities using a transparent and trusted forex trading environment that’s totally secure.
Want to know more about how we’ve designed our systems to meet the needs of clients? Get in touch and we’ll help you with anything you need, from choosing your account type to managing your investment size and leveraging the right commodities trading options to suit you.
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