GOLD, COPPER, AND CRUDE OIL: BEST COMMODITIES TO INVESTING IN
Most individuals are not familiar with this, but commodities play vital roles in our everyday lives. Like any other investment instruments, the ultimate goal for commodities trading is to buy low and sell high. These are also viewed as a way to diversify risks and earn positive returns, especially in times of economic uncertainty.
But before investing in this derivative, you should figure out what are the leading performers among these commodities?
Gold. Gold has always been a symbol of wealth and prosperity, dating back to the Egyptian Pharaohs and Christopher Columbus’ voyage to the New World. This metal was once used as a currency in many countries. One of the most meaningful moves made on a gold-backed and silver-backed currency occurred in 1792 when the United States put the US dollar on the gold and silver standard. But in 1971, President Richard Nixon abandoned the system. This fundamental economic shift made a substantial impact on the price of gold around the world.
Today, the yellow metal is being used as an investment. Its chemical properties make it useful for the manufacture of computers parts and electronics. Gold also has been used to make jewelry for thousands of years.
The United States, China, South Africa, Canada, Russia, Australia, and Indonesia represent the backbone of gold production worldwide. Current demand for gold comes from governments, central banks, mutual funds, hedge funds, and individual investors. It can be an effective hedge against inflation and a form of insurance against war, world unrest, and natural disasters.
Copper. This reddish metal has been known since ancient times. Back in 8,700 B.C., copper has been mined and worked continuously from West Africa to China, Europe, and Central and South America.
It is not a headline grabber unlike other precious metals, but is being used by majority of the industries across the globe. Copper is a key component of the following: air conditioning, automobiles, computers, electrical transformers, heating, lightning, mobile phones, motors, plumbing, roofing, and wiring, among others.
Being a good electrical conductor, it is also corrosion-resistant and flexible. Moreover, it is a necessary trace mineral in all living things, and has the capacity to destroy germs on contact. The demand for this metal has increased as economies of China and India improved and became more industrialized. Through the years, both nations have been pouring large resources into establishing construction, transportation, new airports, and industrial systems. However, there were no sizable copper deposits found for nearly a century. Since then, replenishing its supply is becoming more difficult and expensive.
Crude oil. This naturally occurring unrefined substance is found in certain rock formations. To optimize the crude’s value, it has to be refined into petroleum products. Gasoline or petrol, liquefied petroleum gas, kerosene, gas oil, fuel oil, and naphtha are some examples of crude oil.
Oil wells are used to extract oil from the earth. First oil wells were drilled in China with the help of bamboo poles in 347 A.D. Since then crude oil has become a global energy source.
There are various oil names including Brent Light Crude Oil and Bonny Light, and types of oil such as heavy, light, sweet, and sour. Crude oil is sensitive to laws of supply and demand, as well as upheavals in the Middle East since majority of its supply come from this region. But the demand for this commodity continues to increase. And it goes beyond gasoline because petroleum is used to create asphalt, cosmetics, fertilizer, ink, linoleum, medicines, plastics, shingles, solvents, and synthetic fibers, among others.
Renowned investor Jim Rogers came up with the following questions an investor should ask himself before deciding to invest in commodities: What is the prevailing level of global production? What new supply sources are currently coming online? Are there potential supplies which undergo exploration?
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