What's new

The Best Time for Buying Commodities

Juxtman

Member
Commodity prices tend to move higher during periods of inflation. Sometimes the economy exhibits high levels of inflation, as the late 1970s is a prime example. Interest rates approached 18 percent to combat the high levels of inflation, and commodity prices reached record highs during this period. Not all periods of inflation are this extreme, but commodities can perform well during periods of mild inflation.

Trading or Investing in Commodities
Buying commodities for a long term investment have become much more popular in recent years. The advent of commodity ETFs has made this process much easier. There are also other investments like managed futures that can make money regardless of which direction the price of commodities move. If you are investing in commodities using a percentage of your investment portfolio, timing isn’t necessarily as important as it is for trading commodities.

The two most common times when investors flock to commodities is during times when commodities become very cheap, and commodities are considered a value play. The other time is when commodities are hitting multi-year highs and investors want to catch the trend. In reality, most asset classes attract the most investment dollars after they experience a period of high returns. Sometimes this is a good philosophy, but often investors buy at the top of the market.

Commodities, in essence, are a hedge against inflation. Over a period of decades, commodities typically keep pace or exceed the rate of inflation. Therefore, a buy and hold strategy makes sense, regardless of when an investor buys commodities.

When trading commodities, many strategies can be utilized to take advantage of price trends. One of the more common strategies is scale trading when the price of a commodity reaches multi-year lows. Once a commodity falls below the cost of production, the theory is that the price probably won’t fall much lower and a major bottom is near.

Commodity traders don’t necessarily need commodity prices to move higher to make money. Trading with futures contracts allows commodity traders to get in and out of the markets easily, as well as making money from commodities moving lower. Commodity traders typically use a particular trading strategy and take advantage of short-term movements in commodity prices.

Best Time to Buy Commodities
There is no set formula for the best time to buy commodities, just like stocks. It really depends on an investor’s time horizon and investment goals. Buying cheap is often the better route in my opinion if you have a long-term investment horizon.

The gold market is a good example. The price of gold reached $850 an ounce in 1980, which was an extraordinary price for the time. Many investors were buying gold during the frenzy and found themselves buying at a high price the would not be achieved for another 28 years. On the other end of the spectrum, gold prices reached multi-years lows in 1999 near $250 an ounce. This price was near or below the cost of production and likely close to a floor in price. Gold prices subsequently mounted a decade-long rally dwarfing the previous record high in 1980.

Not all markets play out like the previous example, but it is a good representation of the commodity markets. Sometimes it takes much longer for prices to turn around, but they often do. When investing in a commodity index, it makes things more difficult as some commodities might be near 10-year highs and others might be near 10-year lows. If you can do a little market analysis, there are plenty of vehicles that allow you to invest in individual commodities.

Commodities as an Investment
Just as an investor would buy stocks in an investment portfolio for long-term returns, the same can and should be done for commodities. Regardless of whether commodities are at multi-year highs or lows, an investor can enter at any time. The returns should do well over a holding period of a couple of decades if you buy a broad index of commodities. Remember that commodities are often considered a hedge in an investment portfolio. If commodities are underperforming for a period, it is likely that other investments in a diversified portfolio are doing well.
 

k9898

New Member
GOOd post.

Right now oil is dirt cheap, could be an oppotunity to get profit once the whole virus thing goes away and everything is back to normal.
 

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.

Thread starter Similar threads Forum Replies Date
M Indicators for boom and crash - best and worst Forex Indicators and Tools 1
A Iam search the best martingale Forex Expert Advisors and Automated Trading 1
L Whats best volatility indicators in 2020 Forex Indicators and Tools 1
L Whats the best Volatility Broker besides Binary.com Forex Indicators and Tools 1
S What Is The Best Time Frame To Trade Forex?Long-Term Trading Forex Education 1
S What Is The Best Time Frame To Trade Forex?Mid-Term Trading Forex Education 0
S What Is The Best Time Frame To Trade Forex?Mid-Term Trading Forex Education 0
S best currency pair to trade General Discussions 7
G ICM the best among the 5 brokers I use IC Markets Broker Reviews 4
F best broker for commodity trading. Commodities 0
F the best system found here General Discussions 3
F pepperstone is one the best brokers Pepperstone Broker Reviews 2
C Best indicators for use in trading Forex Indicators and Tools 8
L What is the best EA in your opinion? Forex Expert Advisors and Automated Trading 0
J best timeframe to trade on Forex Education 1
J Best analysis method for intraday trading General Discussions 2
J Finding the best time to trade General Discussions 8
L Profitable EA Please help guys - i need a best EA for me Trading Systems and Strategies 1
C Tutorial Best sites/you tube channels Forex Education 2
E Best strategy is the strategy General Discussions 7
W What is the best courses you have enrolled in? Forex Education 3
H Best signals available, how can i get them consistently Forex Signals and Pamm 5
J EA Best Grid - efficient trading robot Forex Expert Advisors and Automated Trading 0
N Help on AF GLOBAL EXPERT ! best configration for low risk Forex Expert Advisors and Automated Trading 3
G Mostapha rivals best or all kind and stop lose should be around 15 pips Trading Systems and Strategies 0
M The best Forex Signal And EA General Discussions 0
F what is the best trading strategy Interactive Forex Trading 3
F What is the Best Reliable EA Trading Systems and Strategies 4
E Best strategy is the strategy General Discussions 1
S Strategy Best indicator these days MetaTrader 2
C Which is the best broker for scalping General Discussions 10
K best personal strategy Trading Systems and Strategies 2
R Best candlestick pattern indicator Forex Indicators and Tools 2
A Need best Indicator or EA for Profit. Trading Systems and Strategies 2
A Forex Robotron Best Trader MetaTrader 6
R Profitable EA What is the best settings for Gold Catcher EA? Forex Expert Advisors and Automated Trading 2
R Profitable EA What is the best Settings for Passive Ea? Forex Expert Advisors and Automated Trading 5
R Profitable EA What is the best settings for No sleep EA Forex Expert Advisors and Automated Trading 5
mssapan General what is best C trader Or MT4 Ctrader 2
D Best strategy with rules Forex Education 1
N Which is best EA? MOSTLY USED Other Topics 5
N General What is the best method of analysis for forex trading? General Discussions 12
A Best Trading System for intraday.... Trading Systems and Strategies 0
A Download PDF and Indicator thsi is best system so far,, General Discussions 6
S General Which boom and crash indicator is the best? General Discussions 12
Dan1997 Best indicater for pivot point Trading Systems and Strategies 0
GreatSsnipes General what broker is best paired with mt4? PLEASE HELP MetaTrader 5
GreatSsnipes whats the best binary options signal provider? Forex Expert Advisors and Automated Trading 0
H Best ATR trailing stop Forex Indicators and Tools 2
A General WHAT IS THE BEST BROKER FOR NASDAQ General Discussions 2
Similar threads


















































Top
AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock    No Thanks