How to Trade Gold & Oil

With the advent 24/7 global news, buying and selling commodities has become the most accessible and straightforward route for new traders to make money on the financial markets. Geopolitical events can have a direct and often immediate impact on commodity prices. Successful commodity traders keep a close eye on trusted news sources (Bloomberg, Reuters etc), analyze key global events, extrapolate probable outcomes, and execute timely and profitable trades.

Most online trading platforms, like the one Banc De Binary provides, offer their clients real-time price charts, access to breaking news, and technical analysis for all their tradable assets - everything they need to make informed commodity trades.

This wealth of information has allowed investors to spend less time on research as it is all done for them, and more time developing successful strategies.

Most Popular Commodities

OIL (BRENT CRUDE)

Major Producers / Exporters:

COUNTRY	% OF WORLD PRODUCTION
Russia	13%
Saudi Arabia	11%
United States	11%
Iran	5%
China	5%
*Canada	4%
Iraq	4%
United Arab Emirates	3%
Mexico	3%
Kuwait	3%

 

*Oil is Canada’s biggest export and is valued at US$90 billion per year. The US is Canada’s largest trading partner and imports 2 million barrels of crude oil from Canada every day. This relationship, together with the fact that oil is denominated in US dollars gives rise to a close, or direct correlation between the prices of oil and the Canadian dollar. An informed binary options trade on a rising price of oil is a put option on the USD/CAD.

1) Denomination

For over half a decade, oil has been bought and sold in US dollars. With the dollar less stable than it used to be, OPEC (Organization of the Petroleum Exporting Countries) is considering changing oil’s denominated currency to the euro or a basket of multiple currencies. If this goes ahead, there is likely to be a short-term drop in the price of Brent Crude oil.

2) Alternative Hydrocarbon Sources

Extracting oil with wells and drilling platforms is not the only way to access valuable hydrocarbon products. Oil shale and tar sands contain vast quantities of oil. When these technologies mature and the price of production decreases they are certain to have a negative impact on the price of crude oil.

3) Green Energy

The burning of fossil fuels is now generally accepted as being a major cause of global warming. This has resulted in an increasingly aggressive push for ‘greener’ energy sources. If these alternative energy sources become economically viable, the price of oil will plummet.

GOLD

Major Producers / Exporters:

COUNTRY	% OF WORLD PRODUCTION
South Africa	14%
*Australia	9%
United States	9%
Russia	8%
China	6%
Peru	6%
Canada	4%
Indonesia	4%
Uzbekistan	3%

 

*Australia is one of the world’s biggest gold producers and its currency, the Australian dollar, shows a strong, direct correlation with the price of gold. However, investors should note that the correlation is unlikely to be stable for intra-day trades.

1) Industrial Application

As well as being a precious metal, gold is used extensively in industry, particularly in the electronics sector. Gold is an extremely good electrical conductor and does not corrode or tarnish. It is therefore the ideal material for the contact points in solid state electronic devices which operate using very low voltages and currents.

2) Supply/Demand

Due to its high cost of production (approx. US$250 per ounce), it is estimated that the supply of gold will fail to meet demand within the next 45 years. Indeed, according to the World Gold Council, 2,500 metric tonnes of gold is mined annually, but total yearly consumption (jewelry, investment, industry etc.) is 3,500 metric tonnes.

3) Economic Health