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Commodity investments have long been the domain of the floor broker or the large-scale investment brokerage company, that make purchases on behalf of others. However, with online Contracts for Difference (CDF’s) opening up the market to private traders, it is an area of potential profit that we can now all access. Of course, before you sink your life savings into commodities you need to have a good grasp of the market and how the system works. Something you can find out more about by reading the post below.

What are commodities?


Gold and other precious metals are one type of commodity. Image here

Commodities different from other types of investment because they are actual raw materials such as fuel and petrol, natural gas and precious metal like bronze and gold. These are known as hard commodities because they are mined. Farming commodities, on the other hand, such as corn, beef, or sugar are known as soft commodities because they are harvested agriculturally.

How are they traded?

Commodities are traded in specific markets such as Euronext, ICE, and the Chicago Mercantile Exchange. The market is regulated in the US by the Commodity Futures Trading Commission, something you can find out more about at usagov.ctacdev.com, the official US government site.  

Usually, but not always they are traded as futures. This means that a trade is agreed for a future point in time, and the price and options that have been offered must be honored. The idea being that the buyer picks raw materials that are likely to increase in value, meaning they can make a profit from trading these on at a later date.

How can you invest?

As previously mentioned, investing in commodities used to be limited to one of two ways. The first is that a broker that specializes specifically in this market would trade them on the floor of the exchange to make a profit for the financial company they were employed by. The second way is that large financial companies could make investments on behalf of others, something that has traditionally been prohibitively expensive for the average person, and so has remained the domain of big business.

However, now that many Contracts for Difference brokers have set up online, it has opened up the market and all its benefits to a wider range of investors.

Of course, picking the right CFD has a lot to do with the success of an investment in this sector, and you can check out posts like this Commodity.com review to help you make your decision. This is particularly important at the moment, as one particular CFD broker has got into some trouble lately for unethical trading practices. Something you definitely don’t want your money to get caught up in.

What are the risks?

Last of all, before you decide to invest in commodities, you have to make yourself aware of the risks. In fact Commodities are often seen as a fairly high-risk investment opportunity, because it is a fast moving futures orientated market. That means you do have to balance the potential for large gains with the possibility of large losses if you wish to go ahead and invest in this area.

The Swiss referendum that would have required the Swiss National Bank (SNB) hold 20% of its reserves in gold has been rejected by the majority of voters.

Early projections from Swiss broadcaster SRF show 78% of voters rejecting the change.

Two separate proposals that would have curbed immigration and closed a tax loophole for foreigners were also easily defeated, according to projections.

Under Swiss law, any petition signed by 100,000 voters must go to a national vote. Past referendums have covered topics as varied as gun control, a public smoking ban, allowing shareholders to limit executives’ salaries, and assigning state legal aid to animals that might have suffered abuse.Swiss gold referendum

Gold bugs were optimistic about the vote in early November but in the past two weeks hopes began to dim. On Friday, gold fell $24 to 1167, the lowest since November 14.

The plan’s proponents wanted one fifth of the SNB’s reserves to be in gold, which would have involved buying about 1,500 metric tons in the coming 60 months.

Switzerland’s wealthy residents drawn to the tax haven also looked set to offer their thanks to ordinary voters.

A bid to scrap the “Pauschalsteuer” – a controversial law allowing Swiss residents who work outside to the country to pay tax on their spending, not their income – also looked set to fail just over an hour after polls closed.

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