Commodity is a good that is mostly used for trading and it can be exchanged for other goods of the same type. Examples of these commodities are gold, silver, oil, currencies etc. Sometimes, these commodities are used as raw materials in the production of other goods and services. In the forex market, commodities are interchangeable financial products like foreign currencies and indexes. Different commodities in the forex market has different prices and traders who engage in commodity investment uses this medium to diversify their portfolio risk and make additional money through other markets.
To small traders or investors, engaging in commodity investment is not as easy because each commodity contracts has investment requirements like that of initial margin and the risk is enlarged. In other for a trader or investor to make profit out of his commodities, the best solution is to invest through the forex market because the forex market shares a huge range of relationship with other investment assets. Outlined below are 3 commodities that have a good relationship with major currencies in the forex market.
GOLD AS A COMMODITY IN SOUTH AFRICA
Gold is an expensive asset during consumer price inflation and it is as a physical commodity that stores huge wealth. Usually, when the market becomes lower and fear is rampant, both traders and investors seek out gold for its unique value. South African is mainly known for its riches in gold metal. This country is the lead in the top-five gold miners and producers with the likes of China, Australia, the United States and Russia. A commodity chart showed that from April 2009 to June 2010, the relationship of the gold prices and the forex market remained strong as gold prices raised as the South African rand appreciated against the U.S. dollar which rose from 863 dollar to 1,233.25 dollar. Even though the gains are not exactly the same, the basics here are that a trend in one asset will state the direction in the other asset.
SILVER AS A COMMODITY IN MEXICO
Mexico is known for its silver mining and production. In 2009, Mexico was termed the world’s largest silver producer, with a production volume of 105 million dollar worth of silver. This made the Mexican currency important when dealing with Mexican silver miners, and it also creates a good market opportunity for retail traders in foreign. A commodity chart showed that in 2009, silver prices were trading below 12 dollar for a troy ounce and this was in line with a United States dollar/Mexican peso exchange rate of below 14 pesos per U.S. dollar.
COPPER AS COMMODITY IN CHILE
Copper which is a base metal is mostly and mainly used for the production of electrical and manufacturing products. Mostly, it is used for the production of other commodities and retail products. Chile is the world’s biggest producer of copper; it produces 5.5 billion metric tons of copper which surpasses U.S. production at 1.2 billion metric tons. The high volume sale of copper is definitely a source of economic strength to Chile, creating a strong relationship between the currency and copper. A commodity chart showed that in February 2010 and October 2010, the price of copper rose by 32 percent to approximately 3.80 dollar per pound and in the same period, forex investors noticed that the Chilean peso return to 11% over the U.S. dollar.
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