Commodities related questions
Commodity is a raw material that can be bought and sold and can be used in the production of products and services. They are highly correlated to the global economy and industrial production and are important for hedging risks and diversified investments. Through EBC, you can participate in global commodity trading without directly buying or selling commodities and construct diversified portfolios.
Commodities mainly fall into two categories:
Hard commodities: metals (gold, silver, copper) and energy products (crude oil, natural gas) that are extracted from nature are called "hard commodities". They are highly correlated to the global economy and industrial production and are also one of the most traded commodities in the world.
Soft commodities: products produced or grown, such as corn, soybeans, cocoa, livestock, and other crops, are called "soft commodities." Soft commodities are mostly agricultural products and play an important role in hedging. In terms of trading volume, gold is the most popular due to its inherent value and safe-haven status; crude oil is the most traded energy product in the world.
Gold and silver markets open at 1 am on Monday and close at midnight on Friday. There is a one-hour break between 12 am and 1 am every day. Brent Crude trading opens at 3 am on Monday and closes at midnight on Friday. There is a three-hour break between 12 am and 3 am every day. Natural gas and US crude oil trading opens at 1 am on Monday and closes at midnight on Friday. There is a one-hour break between 12 am and 1 am every day.
A point in commodity trading is the smallest price movement in commodity price fluctuations. Usually, we discuss "how many pips it has moved," which corresponds to the pips. The pip for each commodity is different. For gold (XAU), a pip corresponds to the second decimal point, which is 0.1. For example, if gold fluctuates from 1874.52 to 1874.62, it is one pip. For one standard lot of gold, the corresponding floating loss in the account is $10 for every one-pip movement. For silver (XAG), the point value corresponds to the third decimal point, which is 0.01. For example, if silver fluctuates from 22.466 to 22.476, it is one pip. For one standard lot of silver, the corresponding loss is $50 for every one-pip movement. For natural gas (XNG), a pip corresponds to the fourth decimal point, which is 0.001; for crude oil (XBR/XTI), a pip corresponds to the third decimal point, which is 0.01. Before deciding to trade, it is necessary to understand the points on various commodities.
As an anchor of prices, gold is globally recognised as a "hard currency." In uncertain environments, gold is often the main investment target for risk aversion, asset appreciation and value protection. Gold is sensitive to interest rates and often has an inverse relationship with the US dollar. For example, when the Federal Reserve raises interest rates, the expectation of a stronger dollar can suppress gold demand. In addition, gold is directly related to market expectations of the economy. For example, an inverted yield curve of the two-year and ten-year US Treasury yields can trigger market expectations of a recession and push up gold prices. As a physical asset, gold is also directly related to market supply and demand. Usually, an increase in physical demand will prop up gold prices. Common barometers include gold ETFs, which reflect market demand by tracking changes in holdings. EBC provides real-time tracking data and analytical reports of gold ETFs on a daily basis and offers competitive spreads for gold trading based on deep liquidity.
Crude oil, termed as "the king of commodities", is highly correlated to economic and production cycles. The primary factor affecting crude oil prices is market supply and demand. Generally, if oil production increases beyond market demand expectations, oil prices will decline. Oil drilling data and changes in production by the OPEC are closely watched to track crude production. As a pro-cyclical commodity, when the economy is in an expansion phase, crude oil demand usually expands, pushing prices higher, and vice versa suppressing oil prices. It is worth noting that crude oil is not a finished product and is easily influenced by the related industry chain. For example, if the refinery utilization rate is insufficient, it will lead to an increase in refined oil prices, thereby driving the demand for crude oil in refineries. Additionally, product demand highly correlated with crude oil, such as cars, directly affects crude oil prices. You can flexibly build exposures to oil markets and seize trading opportunities without directly purchasing crude oil.
To ensure the safety of funds, it is crucial to choose a reputable and strictly regulated trading broker before deciding to engage in trading.
Any eligible client of EBC can claim up to a maximum of £85,000 under FCSC rules.
