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COMMODITIES MARKET

Trading Commodities

 

1. Trading Oil Price Volatility

Historically, the price of oil moves in a wide price range from 30 to 150 U.S. dollars per barrel. The leverage of capital taking place on derivative markets gives a good explanation to excessive short-term fluctuations of the oil price. 


Two International Oil Types

1) Brent

Brent oil is the combination of 15 different types of oil. Brent is priced with a market premium of about $ 4 to $ 5 per barrel in comparison to Opec Basket price (Opec Basket is mentioned later).

2) West Texas Intermediate (WTI)

WTI oil is characterized by high quality therefore is mainly used for gasoline production. Historically, WTI is priced with a market premium of about $ 1 to $ 2 per barrel in comparison with Brent and $ 5 to $ 7 per barrel in comparison to the Open Basket.


How the Price of Oil is determined

There are three main ways to determine the price of oil: a) NYMEX price and b) Opec Basket price c) US Imported Refiner Acquisition Cost.

1. NYMEX Futures Price

2. The Opec Price (OPEC Basket)

3. Imported Refiner Acquisition Cost (IRAC)


Alternative methods to trade the fluctuations of the Oil Price

1) Buy / Sell shares of Oil Companies
2) Buy a Derivative Contract (Options and Futures Contracts)
3) Buy an Oil Mutual Fund
4) Buy an Oil-Stock ETFs (Exchange Traded Funds)

 Trading Oil Fluctuations

 


2. A Historic View of the Price of Gold


The total amount of available gold in the world today is about 156,000 tons. Each year only 2,500 tons are mined from which the 2,000 tons are absorbed by the jewelry industry and the rest 500 tons are used as investment gold.

Looking at the historic fluctuations of the Gold Price

Gold Rally during the 70s

In 1971, Bretton Woods system was official ended. By that time, the price of gold was traded for only $41 / Ounce while ten years later, in 1980, the price of gold exceeded $600 / Ounce.

Agreements and key systems to control the price of gold until 1971

GOLD STANDARD RULE

BRETTON WOODS FIXED RATE SYSTEM

WASHINGTON AGREEMENT ON GOLD (WAG)

Gold prices during the period 1257-1945 (British Official Price)

Thanks to the excellent records ofUnited Kingdom we are able to trace with accuracy the price of gold (from year to year) from 1257 until 1945, when the Official UK Price has ended (British Official Price).

Countries with the highest Gold Reserves

In the list of the countries with the highest gold reserves per-capital,Switzerland is found at the top, followed byLebanon andGermany. As concerns countries with the highest total reserves -U.S. is on the top holding 8,134 tons of gold, followed byGermany holding 3,401 tons of gold.

► Historic View of the Gold Price

 

Compare Binary Options Brokers at Binary Value:

» Best Brokers: Oil Traders

» Best Brokers: Gold Traders

 

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