Two often-overlooked (by individual investors) forms of investing are commodities and currencies. They tend to be more affordable forms of trading, but may also carry some inherent instability. What are commodities? How do commodities and currencies trade? What are the benefits and risks?
Commodities
Investopedia defines a commodity as:
Oil prices are heavier today, paring yesterday’s substantial (~6%) gain. The realization that an increase in Iranian oil exports is still several months off at best fueled gains. Citing increased demand, Saudi Arabia announced a reduced discount to its Asian customers next month.
Other producers expect to match suit. At the same time, a slowing of US rig shutdowns, inventory builds, and an actual small decline in US output (week ending March 27) also encouraged ideas that a bottom in oil prices is being carved out.
In the midst of foreign investors selling lira, Turkish investors are holding higher yield bonds over wide speculation that national interest rates will decline.
While we’re so used to the terms savings and debt, do you think you know what money actually is? Facts like: What’s the money made of? How much it costs to produce a currency? How many people have credit cards? This visual provides all sorts of fun facts about the state of cash in 2013.
Twice a year The Economist publishes the Big Mac index. It is a fun guide to the world’s currencies that attempts to adjust them all to an equitable level through the great equaliser known as the Big Mac. Being one of the few prepared food items that can be purchased nearly across the globe, it serves as a great bellwether: Is a country’s currency over-valued?
Bitcoins have finally emerged into the mainstream in recent months, largely on the back of the Cyprus’ troubled banking sector. In this infographic, we put the new digital currency and the oldest form of currency, gold, head-to-head to see which comes out on top.
Bitcoin, in its present form, has a stark resemblance to gold. Both are backed by no one. Both are, relative to fiat currency, inconvenient for day to day use. Gold coins or bitcoins won’t do much good at the grocery store as both lack intrinsic value.
Gold prices tend to spike when there are serious economic, financial and geopolitical risks. But now that the global economy is recovering, prices are expected to trend lower over time as the financial crisis mends itself. As John Maynard Keynes rightly pointed out in 1924, gold remains a “barbarous relic” with no intrinsic value, and is used mainly as a hedge against mostly irrational fear and panic.
The European Commission on Tuesday raided the offices of a number of oil companies to investigate claims that oil giants may have “colluded in reporting distorted prices to a price reporting agency to manipulate the published prices for a number of oil and biofuel products”.
Senior officials at a top US derivatives regulator are considering whether to place Bitcoin under its supervision after the virtual currency collapsed in value last month.
According to a report by the Financial Times, Bart Chilton, one of five commissioners at the Commodity Futures Trading Commissions, has ordered a study to explore whether consumers needed more protection from any mishaps with Bitcoin, whose value collapsed last month.
The ever-growing trend in Bitcoin has economists watching. Compared to gold, whose value plummeted last week, is it inevitable that Bitcoin’s value will also diminish? What would happen if Silk Road (black market where 20 percent of Bitcoin activity can be traced) were to shut down?
Bitcoins are a currency controlled by no government, no company, and no group, but rather by maths: a series of complex cryptographic calculations rule how many Bitcoins are in existence and how many are traded.
