Trading The Gold And Oil Markets In 2010

The price of Gold is trading back at the $1140/42 level which has proved so pivotal over the last five to six months

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The gold charts look bullish as support levels have been holding out for some time. If you discount the price spike and subsequent retreat of November/December 2009 the trend remains higher highs and higher lows.

As Simon Denham of FinancialSpreads.com recently said, I am certainly not a Gold bug. On a fundamental level I can see fewer more useless places for investors to put their funds. With gold you are not providing investment monies for anything at all. Gold is a pure defence play against everything else falling in absolute value.

Having said all that, it does look like the major currencies are weakening. If this continues then, ipso facto, Gold should rally.

If you are looking to speculate on gold then beware of interest rate rises. Eventually interest rates will have to rise and long-dated debt is already showing signs of this. In an environment with high rates Gold may struggle, nevertheless, for now, the metal is enjoying its day in the sun once again.

Trading Crude Oil

The crude oil markets have become a little strange once more with the Brent Crude Oil contract now $2 higher than the US Crude Oil market. Not so long ago it was the other way round.

If you look at the long term averages you can see that US Oil normally trades at around $1 per barrel higher than Brent. As a result crude oil market makers are seeing investors selling quite a bit of Brent Crude.

This type of trade has proved very profitable over the last few years as the price difference has continually moved up to these types of levels only to reverse back again later on.

The worrying thing about it this time is that the oil markets are futures and the price has widened at a time that is not close to a delivery date / the expiry date of the futures contract. As contract expiry looms you can often see unusual moves as traders are forced out of positions. This time though this is not the case and investors looking to take advantage of the price difference should be wary of getting too carried away.

Where to Trade Commodities

There are a number of regulated companies that offer thousands of international markets such as Crude Oil, Gold, Forex and Stocks. With spread betting companies like FinancialSpreads.com and City Index there are no brokers fees, no commissions and you can trade a wide range of markets outside normal market hours.

Please note though, with spread betting you can lose more than your initial investment. Before trading, ensure that spread betting matches your investment objectives. Spread bets carry a high level of risk to your capital. Make sure you familiarise yourself with the risks. Seek independent advice where necessary.

by: Peter Jones

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