Commodity Market
The influence of commodity analysis on Forex trade
How investor can realize a profit on the raw materials market, despite high capital requirements and other difficulties when dealing with commodities? The answer is simple - to make investments via the foreign exchange market. Like other financial markets, the Forex market has a direct communication to other types of investment assets. This communication could be the direct one (when both assets enhance), or reverse (when one assets grows in price, the other falls). Such relationships help investors to obtain admittance to other markets, and are of great help when analyzing trends on the world market.
Types of Basic Commodities
The basic commodities on the raw materials market are the class of assets that includes itself raw materials and resources supplied in an ordinary way and available for an exchange. These examples include:
- Metals, such as iron ore, aluminum, silver or gold
- Foodstuffs, such as wheat, rice, sugar, salt, coffee beans and soya beans
- Energy commodities, such as oil, coal, natural gas and electricity.
On the actual commodity market the bulk of transactions go to trade futures – the contracts, time of delivery of which occurs in a certain period in the future. The benefit of the raw materials market participants consists of the exchange gain between buying price and futures contract selling. This feature offers promising opportunities for income acquisition, making the commodity market instruments attractive to private traders. Commodity prices on the raw materials market are usually specified in U.S. dollars. If the U.S. dollar is not the currency of your trading account, you should be aware that exchange rates fluctuations will affect your results.
The basic commodities could be traded with many brokers by the instrumentality of contracts for difference (CFD).
Commodity Market and the Exchange Rates
The economics of many countries are heavily dependent on basic commodities exports, for example, Australia, Brazil and Canada. Value of currency in these countries is often influenced by commodity prices.
For example, Australia is an important producer of gold. If the price of the gold increases, appears the need for more Australian dollars amount in order to purchase it, and thus, the price of the Australian dollar will increase.