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Silver Trading – How to Start Silver Trading Online

by with No Comment Commodities

Thousands of years of history, hundreds of practical applications in the industry and unique investment value. Find the details of trading and silver investments in this short and comprehensive article.

Table of contents

  • A short History of Silver Trading
  • The Benefits and Use of Silver
  • How to Buy Silver
  • Trading Silver CFDs
  • Silver Stocks and ETFs
  • Best Time to Start Trading Silver
  • Silver Trading Hours

 

investors from all over the world and they are very popular nowadays. Silver is a desirable asset by day traders, speculators and investors, and one of the most popular precious metals in the world. But not everyone knows that more than half of silver demand comes from industries. This precious metal has plenty of practical applications and great prospects are ahead of it. This article is a quick overview of silver trading basics and after reading it you will know more about investing in silver.

A short History of Silver Trading

The history of the silver trade is very long, dating back almost 4,500 years. Ancient Egyptians valued silver more than gold, because silver bullion was very rare in North Africa. The ancient Phoenicians, known as the most skillful traders of the ancient world, imported silver from Cadiz and Tartessos, and then traded silver in the Mediterranean area, which brought them a fortune. 

In the 5th century BC, a large deposit of silver was discovered near Athens, and the city flourished. The ancient Lydians were the first who melted coins from electrum, a natural alloy of silver and gold. In the 8th century, the Anglo-Saxons minted silver coins called ‘sterling’ (240 coins per pound of silver). That’s why now the currency of Great Britain is called the ‘pound sterling’. 

Powerful deposits of silver were discovered in Mexico, Bolivia and Peru after Christopher Columbus’ expedition to the New World in 1492. This provided Spain a world hegemony and wealth for the next 300 years. Partially also due to silver trading, Spain became the largest economy in the world. The name of the U.S. dollar has its origins in the silver trade. The most popular currency in Europe were silver thalers. The Dutch called them ‘daalder’ and after founding the city of New Amsterdam on the island of Manhattan they brought the silver ‘daalder’ there. The inhabitants called it ‘dollar’. New Amsterdam is now the city of New York, and the investing in silver is part of its history.

After the discovery of the Comstock Lode deposit in 1859, the United States became the largest silver producer in the world and the silver trading had to be regulated. In 1967, the United States stopped minting new silver coins and ended its program of buying back silver-plated securities.

For thousands of years silver has been a very important part of world history and currencies. The silver trade has made a powerful contribution to the financial evolution of developed nations. In the coming years, we will see a continuation of the great story of silver investments and trading this special metal.

The Benefits and Use of Silver

Silver metal prices are affected by fluctuations in the supply and demand of the precious metal. Silver has a very wide range of adoption in healthcare, electronics, energy, jewellery, and automotive industries. As a result, the situation in specific industries can cause demand for silver to increase or decrease in prices – which then affects its price.

Silver has the most uses of all raw materials. Silver is needed in production of i.a. computers (malleability), laptops, telephones, water filters, mirrors, batteries and medical equipment (silver is antibacterial). Silver has several thousand uses and currently there are no known alternatives to it, which could potentially make investing in silver profitable. Also important is the lack of price elasticity, because a certain amount of silver is required to produce, for example, laptops or phones. Even if the price of silver increases several times in the future, the producer of a telephone or a computer will still need the same amount of silver, so the demand will be constant or even higher. The silver stock could potentially cause electronics manufacturers to compete for its resources, driving up its price.

Silver and gold are the metals that are shrinking the fastest. According to the United States Geological Survey, at the current rate of extraction, silver could run out in as little as 25 years. Most silver is used up irrevocably. That’s why silver trading could be more and more popular in the future and attract both investors and speculators.

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How to Buy Silver

You have the option of investing in silver or trading silver. There are several differences between these methods.

Investing in Silver

Investing in silver is done through the actual purchase of ETFs, shares of silver companies (e.g. silver mining companies), through the purchase of physical bullion or assets that give you ownership of the underlying instrument – silver.

Trading Silver

Trading silver is speculative and only moves of the silver price are relevant and important here. You can trade silver by entering into transactions on Silver CFD (contract for differences) and using the potential of financial leverage. This kind of contract is a financial contract that pays the differences in the settlement price between the open and closing trades without any physical supply of traded instruments.

Online or Physical?

The traditional way of buying and investing in silver was purchasing physical bars or coins. Over the years, the storage and insurance costs have caused this method to decline in value.

The problems with this type of silver investment are also the high commissions with those kinds of transactions and a large spread (the difference between the buying price and the selling price). Also, delivery of coins and bars can be time-consuming and its physical storage creates a risk of theft and takes up a lot of space in the case of a larger investment. 100 kilograms of silver is currently worth about 75 thousand dollars. Due to its heavy weight, this can create a problem with transporting such a quantity of silver. There is also the risk of buying counterfeit silver coins and products.

Silver investment in physical coins is not very comfortable. When you want to sell your silver investment, you have to find a dealer first; a dealer who will buy your silver. And they can always change their mind.

For these reasons, online silver trading and a modern type of silver investment is becoming increasingly popular. There is a whole range of instruments, such as the ETF’s ,which give you exposure to physical silver price or a group of mining companies, individual shares of listed companies, certificates backed by physical silver which the investor doesn’t have to store in their house or pay for deposit place and of course contracts for difference, the so-called silver CFDs.

Trading silver online is also cheaper, the spread and transaction costs are much lower than in case of trading physical silver. Also, because of market liquidity, you can close your position by one mouse click at any moment when the silver market is open.

That’s why trading silver online has so many advantages and it’s the most popular kind of silver trading nowadays.

Trading Silver CFDs

This kind of trading is addressing risk conscious traders and speculators.

Trading silver CFD gives the advantages of low fees and commissions, very low spread, and possibility of using financial leverage. Thanks to the leverage, trading silver requires only a certain percentage of the whole position. For example using 1:10 leverage gives you the opportunity to open a 10,000 USD contract by using only 1000 USD. This option is for high risk investors and day traders. Using leverage can result in a higher profit but also, of course, a bigger loss on open positions. 

Spot price of silver is the price at which silver is currently quoted – buying at this price would mean that silver could be exchanged and delivered “on the spot” in physical form. CFDs on silver spot prices gives you exposure to the current price of silver without the need to own physical assets.

Silver CFD trading also gives an opportunity to open short positions, in which traders earn money when prices of the instrument are falling. This allows implementation of many different strategies during trading sessions on silver price. We also provide a lot of different indicators on our trading platform like RSI ‘Relative strength index” or Fibonacci levels which can make Your silver trading more efficient.

Silver Stocks and ETFs

Stocks

One way to invest in silver is to buy shares of gold mining companies. In this case, investors gain exposure to the stock market of silver mining related companies, such as Silvercorp Metals (SVM.US), Hecla Mining Company (HL.US) or Endeavour Silver Corp (EXK.US) from NYSE.

Silver producers are heavily dependent on the current market price of silver. When silver prices rise, the outlook for such companies is usually good because the financial performance of such companies is also expected to rise. The shares of such companies are highly volatile, but can give a much higher rate of return than the price of the commodity itself.

Therefore, there is a significant positive correlation between silver prices and some mining companies. It is worth noting that gold mining companies can also pay dividends, which is a huge advantage over direct investment in precious metals. This factor may be particularly important for long-term dividend investors and suggests that in some cases, buying shares of mining companies may be a very wise type of silver investment.

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ETF’s

Silver investment by purchasing Exchange traded funds (ETFs) can make your silver portfolio more diversified and can track the movement of physical silver bullion or price of a group of companies within the silver industry. Trading in silver ETFs gives you a broader exposure than what you’d get from a position on singular stock.

This kind of silver trading is more balanced and also gives the opportunity to receive dividends from distributing ETFs or buying accumulating ETFs, and create diversified portfolios with lower risk, but also with lower growth potential.

Best Time to Start Trading Silver

Many market participants and silver traders wonder what the best time to invest in silver is. Traders are comparing silver investments to gold investments, which is well known as a “safe haven”. This means that it is regarded as a relatively safe asset during tough times, such as during financial crises or recessions. Silver is more volatile than gold and of course there is a correlation between these two precious metals, but not in every case. 

Silver may become popular during high inflation periods, because inflation usually makes people concerned about the shrinking value of their money. Some of them are looking for good investments in well known assets, which can probably have high demand in the future. 

In nature there is only 16 times more silver than gold, but at the same time silver is 75 times cheaper than gold per ounce. This shows that silver could potentially be undervalued given the main factor driving the price of the precious metal, which is rarity. Silver also has several thousand uses in industry and many other branches, gold doesn’t have it. 

Silver is an asset which is liked by long-term investors and risk-taking speculators. Silver investment could help investors build a well-balanced portfolio.

The relationship between silver and US yields is very important in trading silver and also for long-term investment in silver. It emerged after the global financial crisis. When investors are buying US government bonds (US Treasuries), US yields sometimes fall and it may be a positive signal for silver prices (also for gold prices). But when investors decide to sell US Treasury bonds yields tend to rise. This is negative for both silver and gold prices. Precious metal speculators should closely observe this correlation in the future to find the best time for buying or trading silver.

Silver prices probably have higher growth potential than gold, but also the market of this asset is more volatile which makes it liked by speculators, funds but also by retail investors. There seems to be still a great future ahead of silver investment, in this case nothing has changed since almost 4500 years ago.

Silver Trading Hours

What about available silver trading hours? This information is especially important for day traders. Spot gold and silver trading is available 23 hours a day from 6pm ET Sunday through 5pm ET Friday. Trading silver is closed from 5pm to 6pm ET daily. Spot silver trading follows CME holiday closures. The spot price is static when the market is closed. At all other times the prices of silver are fluctuating.

Of course the best time for silver trading is during periods of very high liquidity, when market volatility is higher. When there are high trading volumes in the market, volatility increases. It could be influenced by publishing important political or company news but also because of overlapping trading hours of different locations. But If you treat silver investment as a long term You don’t need to follow temporary market volatility.

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Oil Trading – How to Invest in Oil

by with No Comment Commodities
  • Other options for investing in Oil with PRIMAL TRADE
  • What to look for when investing in oil
  • What else should you keep in mind?
  • Summary

 

 

In this article you will learn:

  • How to Trade Crude Oil via CFDs?
  • What are the basic differences between Brent oil and WTI oil?
  • Other options for investing in oil with PRIMAL TRADE
  • What to look for when investing in oil
  • What else should you keep in mind?

Crude Oil is recognised as the No.1 commodity in the world, primarily due to the fact that it is used to produce liquid fuels, which are used in various means of transport; water, land and air. Oil is also used in the production of other important goods, such as synthetic materials, asphalt, and more. However, the most important use of oil is to obtain energy. Currently, it accounts for about 1/3 of global energy supply! Little wonder it is the most-traded commodity in the world, providing great market liquidity and, therefore, great investing opportunities.

How to Trade Crude Oil via CFDs with PRIMAL TRADE

One of the many ways to get exposure to oil is to trade Contracts for Differences (CFDs) on OIL or OIL.WTI. CFDs are extremely fascinating instruments with many interesting features that affects the uniqueness of this product, such as:

  • CFDs are derivatives products – you don’t actually own the underlying product, you’re simply speculating whether the price will rise or decline.
  • CFDs are leveraged – which means you can make a trade without having to deposit the full value of an asset in order to place a trade. Therefore, when using the financial leverage mechanism, it should be remembered that both the chances of potential profits and the size of the possible loss are increased.
  • CFDs allow investing on both the rising prices and falling prices.
  • The possibility of taking long positions (BUY) or short positions (SELL) in combination with the use of the financial leverage mechanism makes these types of contracts currently one of the most flexible and popular types of trading on financial markets.
  • CFDs allow you to invest even in small parts of the lot, so you can adjust the size of the transaction to your own investment opportunities. 

PRIMAL TRADE offers trading with CFDs for Brent crude oil (OIL) and CFDs for WTI crude oil (OIL.WTI), i.e. instruments whose price is based on the current crude oil price Brent and WTI, listed on the organised market.

The easiest way to trade in the oil market is to use our PRIMAL TRADE trading platform, which is a complete trading tool that gives you the opportunity to invest in a wide range of financial instruments. Thanks to the calculator built into the order window, you can set the Stop Loss or Take Profit order in accordance with the assumptions resulting from your own investment strategy.

First, let’s look at how to place a buy order, otherwise known as a long position. Let us assume that, after analysing the market, you believe that the price of oil is going to rise in the near term. Initially, you should determine the size of the transaction. Next, you could set up a Stop Loss order to limit your potential losses and a Take Profit order that will close the order when you make a profit. The easiest way to enter into a new transaction is by selecting the chart positions in the click & trade panel, which can be found on the left side of your screen in the Market Watch module.

Source: xStation5

Please be aware that the presented data refers to the past performance data and as such is not a reliable indicator of future performance.

Alternatively, the click & trade panel is also located above the chart, in the upper left part of the Chart Window.

 

Please be aware that the presented data refers to the past performance data and as such is not a reliable indicator of future performance.

After you specify the above mentioned data, just click on the green Buy button.

In order to profit from falling prices, you could enter a short position. The process of concluding transactions is similar to the one described above, except that after setting all parameters, you need to click the “Sell” button.

Source: xStation5

Please be aware that the presented data refers to the past performance data and as such is not a reliable indicator of future performance.

If the market is open, then the order should normally be filled. The status of the transaction is visible in the Open Positions window below the chart. Once it’s time to close your position, you can either click “Close” or reverse your initial trade.

Source: xStation5

Please be aware that the presented data refers to the past performance data and as such is not a reliable indicator of future performance.

What are the basic differences between Brent oil and WTI oil?

The following two oil benchmarks are most commonly talked about on the oil market: Brent and WTI. Nevertheless, there are more types of Oil, depending on its properties or the place of its extraction. Price also depends on its properties, location or transport.

The most important oil benchmarks. Source: Intercontinental Exchange (ICE)

Brent crude oil (OIL) – comes from 15 oil fields located in the North Sea. The low sulfur content, which is below 0.37%, indicates that it is sweet oil, and its low density allows it to be described as light, ideally suited for the production of diesel oil and gasoline. It is estimated that nearly 70% of global oil transactions are made on Brent oil. The Brent crude futures contracts are listed on the London Intercontinental Exchange (ICE).

WTI crude oil (OIL.WTI) – West Texas Intermediate, is extracted in the United States, Texas. Due to the sulfur content, which is below 0.24%, it is referred to as sweet and light oil, because of its low density. WTI crude is the underlying instrument for futures contracts on the New York Mercantile Exchange (NYMEX). It is characterised by high quality, one of the highest in the world.

The difference in value between Brent crude oil and WTI crude oil, i.e. differential, technically suggests superiority of WTI oil due to its better technical parameters. However, Brent prices are actually often higher due to supply and demand conditions. 

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Table of contents

  • How to Trade Crude Oil via CFDs with PRIMAL TRADE
  • What are the basic differences between Brent oil and WTI oil?

Other options for investing in Oil with PRIMAL TRADE

In addition to CFDs, there are also several ETFs that allow investors to gain exposure to the oil market. Apart from that, investors might also seek indirect exposure to the prices of oil. Investing in CFD stocks of the largest oil mining companies is another way of creating a diversified portfolio. It is worth pointing out that such a solution may have an advantage over direct investment in commodities, as some companies may also pay dividends.

Our ETF and Oil Stock scanners may be found helpful when looking for investment opportunities on the Oil market. Source: xStation5

Please be aware that the presented data refers to the past performance data and as such is not a reliable indicator of future performance.

What to look for when investing in oil

Oil prices are constantly changing due to fluctuations in demand and supply, both in the economies of individual countries and around the world. There are several factors that affect oil prices, including: natural disasters, war, civil unrest, currency movements, global economic growth, transportation and storage costs. Moreover, the recent alternative fuel developments have also been influencing the oil market.

Therefore, it is important to keep up to date with any news or data releases that could move the price of oil. Investors have access to the most crucial information from the oil market thanks to our market “News” section in which, apart from the publication of the most important macroeconomic data, our analysts present a general picture of the market and indicate potential investment opportunities. When analysing the market, it is also important to have access to real-time oil prices, which is possible thanks to our xStation5 platform.

In order to gain access to the latest information from the oil market, simply click on the “News” section on the platform.

Source: xStation5

Please be aware that the presented data refers to the past performance data and as such is not a reliable indicator of future performance.

What else should you keep in mind?

At PRIMAL TRADE, Oil CFDs are based on futures contracts listed on the exchanges, which expire each month. PRIMAL TRADE offers CFDs with a 365-day expiry date (does not apply to share-based CFDs and ETFs) so that our clients do not have to close a position based on an expiring contract series every month and open another. In this way, customers can continuously, for up to 365 days, keep one CFD based on the price of oil, without having to open new positions every month, as is the case in the underlying market. Usually, the transition to the next series of contracts occurs a few days before the expiry date of the current series of futures contracts on the underlying market. We will inform you about upcoming rollover dates in trade news.The date of the last and the next rollover can also be found on our platform by clicking on the “Instrument information” icon located in the “click & trade panel.”

Source: xStation5

Please be aware that the presented data refers to the past performance data and as such is not a reliable indicator of future performance.

Source: xStation5

Please be aware that the presented data refers to the past performance data and as such is not a reliable indicator of future performance.

Summary

Oil will be a strategic energy resource for a long time to come. The relationship between demand and supply can have a huge impact on the price. In the case of the oil market, it is extremely important to track the publication of important reports that may increase market volatility. Oil CFDs, which are available at PRIMAL TRADE, provide additional opportunities to spot new interesting investment opportunities both when the price of this commodity increases, as well as when it falls. The situation on the financial markets will be linked to the oil market for a long time. 

To start investing in the oil market, all you need to do is open an investment account. The process of opening an account with PRIMAL TRADE takes place completely online. In order to check the xStation transaction system and test your own investment strategy, it is worth opening a free demo account with virtual funds.

Access to the transaction system is possible through a browser, desktop version and mobile application, thanks to which you can quickly and easily control your transactions from anywhere in the world and from all devices that support Android and iOS systems.

 

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A closeup of industrial pipelines around a factor on a sunny day

Gas Trading – How to Invest in Natural Gas

by with No Comment Commodities

Ecological alternative fossil fuel natural gas is back in favour of investors! Get interested in the growing natural gas market.

Table of contents

  • The short history of Natural Gas 
  • The benefits and use of Natural Gas
  • How to Buy Natural Gas
  • How to Trade Natural Gas CFDs
  • Gas stocks and ETFs
  • What Is the Best Time to Start Investing in Natural Gas?
  • Natural Gas Trading Hours

 

Natural gas, due to its energy qualities and its “green” ecological advantage over other fossil fuels, is considered an intermediary energy source between the “dirty fuels” that leave a carbon footprint and the advanced energy future of the Earth. The energy transition could take decades or several decades, depending on the country.

Meanwhile, the demand for energy is constantly growing both in industry and households. 

This situation makes trading natural gas a very interesting solution and, as we can see, high money volumes entered the natural gas stock market in the last few months, especially after panic information from China about the lack of coal resources in the upcoming winter.

The energy crisis has shown the potential there is in commodity trading and uncovered the “true price” of several unfashionable, very important and economically crucial energy commodities, like natural gas.

The energy policy of each country varies depending on the level of the developed economy and available natural resources. However, we can recognise that humanity is in an energy transition to green energy sources that is supported by powerful institutions. 

This article is a quick overview of gas trading basics and after reading it you will know more about investing in natural gas and companies from this well developed, forward looking sector.

The short history of Natural Gas 

Natural gas has been known since ancient times, but its commercial use is relatively young. Natural gas has taken hundreds of years to become an effective energy source, although the history of its use dates back to ancient times.

Around 1000 BC in ancient Greece, the Delphian oracle was built on Mount Parnassus at a site that proved to be a source of natural gas. Around 500 BC the Chinese began using “pipelines” made of bamboo to transport the gas that came to the surface. The Chinese used it to boil sea water to make drinkable water.

However, the first commercial use of natural gas occured 160 years later, in Great Britain. Around 1785, the British used natural gas produced from coal to light streets and households. 30 years later, Baltimore, Maryland, became the first city in the United States to light its streets with gas.

In 1821, William Hart drilled the first natural gas well, in upstate New York. Thus was founded the Fredonia Gas Light Company, which became America’s first natural gas distribution company.

For most of the 19th century, natural gas was used almost exclusively as a light source, but in 1885, Robert Bunsen’s invention opened up new uses for natural gas. In the 20th century, efficient pipelines began to be built. 

The benefits and use of Natural Gas

Natural gas is used to produce fuels on an industrial and private scale. It is also a needed ingredient in the production of detergents, synthetic fibers, paints, plastics, and synthetic rubber.

Natural gas is also a convenient fuel for stationary energy equipment such as boilers, turbines, dryers, industrial heating furnaces and domestic cookers. There is no substitute for natural gas in the manufacture of light bulbs or gas turbines.

The main application of natural gas is of course the heating of households, i.e. convenient automation and regulation of the combustion process, makes more and more households use gas installations. Gas in households is also necessary for heating water and preparing meals.

Gas is also used on a mass scale in animal husbandry, drying of cereals, seeds and production of fodder or animal feed. In industry it is also used to heat production and office space, to heat halls and in technological processes.

Because of its relatively low price compared to oil, natural gas is used on a mass scale as fuel for both cars and trucks. Uniform combustion temperature, calorific value, automation of combustion processes, ease of regulation and no problem with waste disposal are powerful advantages of all gas-fired systems.

These are all important aspects for investors in investing in gas because understanding how the industry works is a very important part of every decision-making process.

How to Buy Natural Gas

You have the choice and you can choose to invest in natural gas or trade natural gas. There are several differences between these methods. Of course it’s also possible to use both of them at the same time.

 Investing

Investing in natural gas is possible through the purchase of ETFs or shares of gas sector companies. Natural  gas stocks like Gazprom (OGZD.UK) or Royal Dutch Shell (RDSA.UK) or Shell are well known for paying regular dividends.

Natural gas stocks like Shell or BP (BP.UK) still give good opportunities and prospects for investors who avoid high risk and high volatility in the market. At the same time, prices of these companies are still lower than prices before Covid-19 stock crash.

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Trading

Trading natural gas is speculative and only the moves of the gas price are important here. Gas CFD a financial contract that you trade to earn the price difference between your open and closed positions, without physical delivery of natural gas. It’s also a good option for investors, who like high risk ventures and dynamic trading.

You can trade natural gas by opening positions on NATGAS CFD (contract on price differences) and using financial leverage. Thanks to the leverage trading NATGAS requires only a certain percentage of the whole position. For example using 1:10 leverage gives you the opportunity to open a 10,000 USD contract by using only 1000 USD margin. Thanks to CFD trading, day traders can earn money even when NATGAS price falls down – by opening short positions. This kind of speculation can be especially dangerous and volatile because of NATGAS price action. CFD Natgas trading gives traders an opportunity to maximise their profit faster even when price action is not very big, but loss can also be much bigger because of using leverage.

Our NATGAS price instrument is based on contracts from Chicago Mercantile Exchange CME Henry Hub natural gas quotations.

Trading Gas Online

There is no way to simply purchase a physical supply of gas. Especially trading physical natural gas is complicated and not similar to precious metals like gold or silver. The storage of natural gas is also an additional, big challenge for investors.

Therefore, in order to make money on the movement of the blue fuel market, the most optimal solution for individual investors and institutions is online gas trading.

Online trading is also the easiest, has the most favorable charges conditions and allows you to customize your personal investment strategy by choosing CFDs on natural gas, shares of natural gas stocks or ETFs.

Online natural gas trading gives you exposure to an extremely volatile and popular market with great perspectives without leaving your home.

How to Trade Natural Gas CFDs

First of all, NATGAS CFD trading gives traders the opportunity to open short and long positions. Short positions give investors the opportunity to take profits even when prices of NATGAS are falling.

By trading gas, you can use market volatility and open positions during very fast gas price movements. Financial leverage is risky and can result in large losses, but can multiply a day trader’s profit.

The only fee that you pay in this case is spread (the difference between ASK buy price and BID sell price) and swap points. The spread is very small and costs cents depending on the size of a position, swap points are the costs that the broker incurs in financing leveraged positions; swaps are accrued daily to the yield of the opened NATGAS position.

Gas stocks and ETFs

Stocks

There are many ways to diversify the risk of your gas stock assets portfolio. One of them is certainly buying shares of large Russian and American companies operating in the natural gas market. Natural gas stocks in the long term are in general less volatile than natural gas spot prices. Of course smaller gas stocks are more volatile and risky but have bigger potential because of relatively smaller market capitalisation and good perspectives. Of course, if they are well managed and profitable, we recommend all investors who are interested in natural gas investment do an analysis of each company.

You can invest in natural gas by buying shares of companies from gas energy sector like Gazprom (GAZ.UK), Rosneft (ROSN.UK), Tatneft (ATAD.UK), Exxon Mobil Corporation (XOM.US), Exxon Mobil Corporation (XOM.US), Royal Dutch Shell (RDSA.UK) or Chevron (CVX.US)

Gazprom (GAZ.UK) is the biggest natural gas company in the world with a very attractive dividend ratio. It’s also one of the biggest publicly traded stocks in the market.

Gazprom is a Russian state-majority energy corporation with headquarters in Saint Petersburg. In 2019, with sales exceeding $120 billion, Gazprom was Russia’s largest company by revenue. In the Forbes Global 2000 ranking in 2020, Gazprom was ranked at 32 place largest public company in the world.

Gazprom operates in every area of the gas industry, including upstream and downstream, refining, transportation, marketing, distribution and power generation which allows it to diversify its gas investment risk. In 2018, Gazprom produced 12% of global natural gas production. Gazprom exports gas through pipelines the company builds and owns in Russia and abroad, such as TurkStream or NordStream. Gazprom also has subsidiaries in the financial and industrial sectors – including aerospace, media, and majority stakes in other companies.

The company has been involved in Russian government diplomacy, gas pricing, and pipeline access for other countries since 2000.

The company is in majority owned by the Russian government, through the Federal Agency for State Property Management and Rosneftgaz.

As of November 8, 2021, Gazprom’s capitalisation is well over $100 billion, and has doubled the share price from 8 November 2020 with the latest paid dividend from 29 July 2021.

Rosneft (ROSN.UK) is a Russian energy company based in Moscow. Like Gazprom, Rosneft specialises in the exploration, extraction, production, refining, transportation, and sale of oil and natural gas. The company is also controlled by the Russian government through its holding company Rosneftgaz.

Rosneft was founded in 1993 as a state-owned enterprise and later became part of a series of state-controlled gas and oil assets. Rosneft has become one of Russia’s biggest energy companies after buying the assets of former oil company Yukos at state auctions and acquiring OJSC TNK-BP in 2013.

Rosneft is currently the third largest Russian company and the second largest state-controlled company (after Gazprom) in Russia in terms of revenues exceeding $100 billion annually. Internationally, it is one of the largest natural gas companies, ranking 24th in terms of revenue. In the Forbes Global 2000 ranking for 2020, Rosneft was ranked 53rd among the largest public companies in the world. The company operates in more than twenty countries around the world.

Rosneft and Gazprom as the biggest natural gas stocks can be considered as a great gas investment for long-term value investors. These natural gas stocks regularly pay dividends and are profitable every year. They also have an established market position and direct influence on gas prices. Increasing gas prices and high demand from other countries can make these stocks listed even higher in the future with stable good prospects for natural gas investment.

Exxon Mobil Corporation (XOM.US) is an American multinational oil and gas corporation headquartered in Irving, Texas. It is the largest direct descendant of John D.Rockefeller fortune and Standard Oil.

One of the world’s largest companies by revenue, ExxonMobil has ranged from the first to the sixth largest publicly traded company by market capitalisation from 1996 to 2017. The company ranked third in the world on the Forbes Global 2000 list in 2016. ExxonMobil was also the tenth most profitable company in the Fortune 500 in 2017. As of 2018, the company ranked second in the Fortune 500 list of largest U.S. corporations by total revenue. More than half of the company’s shares are held by institutions. Shareholders include such giants as The Vanguard Group and BlackRock.

ExxonMobil is one of the world’s largest energy companies and has influence over American foreign policy and its impact on the nation’s future.

Royal Dutch Shell (RDSA.UK) is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and the fifth largest company in the world by revenue in 2020. Shell is the largest company headquartered in Europe and the largest company not headquartered in China or the United States. Forbes Global 2000 ranking of 2020 ranked Shell as the 21st largest public company in the world. In 2013, Shell ranked number one on the Fortune Global 500 list of the world’s largest companies and in that year its revenues were equivalent to 84% of the Netherlands’ GDP.

Since then Shell, has slipped lower among the largest companies on the Global 500, but is still the largest non-state energy corporation in the world.

Like Gazprom and Rosneft, Shell operates in all areas of the gas industry, including exploration and production, refining, transportation, distribution and marketing, petrochemicals, and power generation. Shell is also active in renewable energy, including biofuels and hydrogen.

Shell operates in more than 70 countries and has approximately 44,000 gas stations worldwide. As of December 31, 2019. The company has subsidiaries in the US and is also a large shareholder in other energy companies; including in developing countries.

Also worthy of investors’ attention are other big natural gas companies like Chevron (CVX.US), Hess Corporation (HES.US), Contango Oil & Gas Co. (MCF.US), NiSource (NI.US), Oneok Corp (OKE.US), Pembina Pipeline (PBA.US), UGI Corporation (UGI.US), BP (BP.UK), Tatneft (ATAD.UK), Total Energies (TTE.FR), Gaztransport ET Technigaz SA (RTT.FR), Rubis (RUI.FR), Avance Gas Holding AGAS.NO, Naturgy Energy Group SA GAS.ES, Enagas (ENG.ES), Italgas (IG.IT), PGNiG (PGN.PL), Grupa Lotos (LTS.PL)

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ETFs

Natural gas investment by purchasing exchange traded funds instruments (ETFs) is a more diversified choice than a position in a singular gas stock company. Investing in gas ETFs gives you also a wider exposure to the market.

This kind of silver trading is more balanced and and also gives the opportunity to receive dividends from distributing ETFs like iShares STOXX Europe 600 Oil&Gas (SXEPXE.DE) or buying accumulating ETFs like iShares Oil&Gas Exploration and Production (IOGP.UK). Those instruments are tracking share prices of a group of gas sector companies from the industry. You can also choose ETFs which track moves of natural gas prices like WisdomTree Natural Gas (NGAS.UK).

WisdomTree Natural Gas (NGAS.UK) is an investment fund that enables investors to gain exposure to their natural gas investment by tracking the price of the Bloomberg sub-index Natural Gas Subindex (“Index”).

iShares Oil&Gas Exploration and Production (IOGP.UK) this fund gives direct exposure to a broad range of global companies involved in the exploration and production of gas and oil. Fund IOGP.UK has a lot of gas companies in holdings like EOG Resources, Canadian Natural Resources, Conocophillips, Devon Energy Corp or Hess Corp.

iShares STOXX Europe 600 Oil&Gas (SXEPXE.DE) is a well known fund which aims to track the performance of the STOXX Europe 600 Oil & Gas index. SXEPXE.DE is a distributing ETF, which means that the fund distributes income received to shareholders. This is especially good information for long term gas investment. The fund has such big companies i.a. Total Energies (TTE.FR), Royal Dutch Shell (RDSA.UK) and BP (BP.UK) in holdings which makes its price is not as variable.

Investments in gas by ETFs creates diversified resources portfolios with lower risk but also with lower growth potential.

What Is the Best Time to Start Investing in Natural Gas?

Many investors are wondering when to start trading natural gas and wonder if it is too late to open positions in the natural gas market

The increase in gas prices has become a global issue and has particularly affected European countries, which are still dependent on external supplies. Russia’s market policy as the world’s largest supplier of natural gas has a powerful influence on actual prices; both gas spot price and real prices of commodities for households and industries in countries which import gas. 

For example, in Lithuania from December 2020 to October 2021 natural gas became almost 90% more expensive. Increased natural gas energy prices like domino effect have resulted in higher prices for many raw materials and manufactured goods due to increasing production costs.

This situation is closely related to the global energy crisis. Natural gas is used in power and heat generation, heavy and light industry, and transportation. This means that as long as the industry has energy needs and households from all over the world use gas for cooking and heating, investors can expect the demand for the commodity to remain high.

A reason for the growing demand for gas is also the “green” policy of decarbonization and moving away from fossil fuels. Natural gas makes it possible to reduce emissions of CO2 and oxides of nitrogen and sulphur. This fact and competitive prices have led to gas being recognized in the European Union as a transition fuel on the road to climate neutrality.

It is assumed that the price of gas extracted by Norwegian companies, Russian Gazprom or Rosneft may increase due to increasingly expensive extraction and because of geopolitical reasons, including gas price manipulations.

In such a situation, gas imports from the US may increase because Henry Hub gas is relatively cheap. This raises the scope for companies involved in liquefied gas LNG and its transportation.

The demand for LNG supply has also increased significantly in Asia after information about a very hard winter coming and lack of energy resources facilities. Such information was passed by the Chinese government and synoptics in October and November 2021. Very hard winter in Asia in 2021 is possible because of the ‘El Nino’ atmospheric front. 

Through problems with the China coal supply and lack of other energy sources, China has begun to hedge with supplies of liquid LNG, which has caused the demand in the natural gas market to rise sharply recently.

In winter household gas demand also increases because of heating, which often has results in higher profitability for natural gas stocks and higher gas market prices.

Gas is still relatively cheap and less environmentally hazardous than coal. Until the economy finds an effective technology for storing energy from renewable sources or massively builds nuclear reactors, we can expect the demand for gas to grow. Gas-fired power plants are relatively easy to operate, and can be turned on and off at any time.

Natural gas is a raw material in between fossil fuels “no green” and modern energetics of developed economies based on uranium or hydrogen. However, the energy transition may take decades. Natural gas investment seems to have very strong fundamental reasons for growth and evolving next year.

Natural Gas Trading Hours

What about available gas trading hours? This information is especially important for day traders. Spot natural gas trading is available 5 days per week from 8:30 CET to 23:00 CET from Monday to Friday. Trading natural gas is not available during weekends on our platform. Natural gas spot price is static when the market is closed. At all other times the prices are constantly fluctuating.

Of course the best time for natural gas trading is during periods of very high liquidity, when market volatility is higher. When there are high trading volumes in the market, volatility increases. This situation is a big opportunity not only for investors but also for day traders, who are using leverage to take large profits even on short positions. Also bear in mind that leverage could result in larger losses. 

High volatility could be influenced by publishing important political or company news, but also because of overlapping trading hours of different locations. Natural gas is one of the most volatile raw materials and it’s still very sensitive to political issues, for example the information from Russia about the Nord Stream 2 pipeline issue. Russian strategic management still has a huge impact on the natural gas market and both day traders and gas investors shouldn’t deny it.

The weather predictions are also very important for the natural gas market; information about harsh winters can be a spark igniting the gas price.

But you don’t need to follow temporary market volatility. On our platform, xStation you have the opportunity to purchase natural gas ETFs like Natural Gas (NGAS.UK) or big and recognisable stocks like Gazprom (GAZ.UK) or Rosneft (ROSN.UK); in these cases as an investor you don’t need to look at natural gas fluctuating prices and just be longterm on natural gas investment.

 

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Commodity Trading – How to Invest in Commodities

by with No Comment Commodities

Table of contents

  • A brief historical overview of the commodities market
  • What does the term “commodities” mean?
  • Different categories of the commodity market
  • Characteristics of commodity trading
  • How to trade commodities with XTB?

Trading in the commodity market is an interesting and specific type of investment, which is in many respects similar to stock trading. Both stock and commodity markets are closely linked, and news on the commodity market can also help individual investors in the stock market. In the commodity market, trading is focused on raw materials, such as precious or industrial metals, unlike on the stock exchange, where the main subject of trade are shares of individual companies. As for the similarities, both stocks and commodities are traded on stock exchanges and their prices are subject to periodic fluctuations, which both long-term investors and traders who only open short-term positions try to take advantage of.

A brief historical overview of the commodities market

The commodity market is one of the oldest financial markets. From a historical point of view, the trade in goods dates back to ancient times. In the beginning, people exchanged goods for goods (the so-called barter). Later, around 4500 BC, the first primitive money was introduced in Sumer (present day Iraq). People exchanged clay tablets in exchange for goods. Subsequently, commodity trading has evolved over the centuries, but the turning point was the creation of the Chicago Board of Trade (CBOT) in 1848. Next, CBOT merged with the Chicago Mercantile Exchange (CME) in 2007 to form the CME Group. Today, it is one of the most popular types of markets to trade, whether by individual investors, large financial institutions or speculators.

Another important institution in the world of commodity trading is the New York Board of Trade (NYBOT). This exchange was established in 1870 under the name the New York Cotton Exchange. In 2004, NYBOT merged with the Coffee, Sugar and Cocoa Exchange (CSCE). In 2006, it became part of the Intercontinental Exchange (ICE). Currently, NYBOT mainly deals with futures and options on physical commodities such as cocoa, coffee, cotton, sugar and orange juice. The exchange also deals with trading currencies, interest rates and market indices. Thanks to these financial instruments, the producers and buyers of these commodities have an opportunity to lock in prices ahead of time in order to protect against unforeseen volatility or production shortages.

As for other significant stock exchanges, the New York Mercantile Exchange (NYMEX) was established in 1872 and focused on the dairy trade. In 1994, the largest physical commodity exchange in the world of that time was established, after NYMEX merged with the Commodity Exchange (COMEX). Then in 2008, it merged with the CME Group of Chicago. In Europe, most transactions on the commodity market take place on the London International Financial Futures and Options Exchange (LIFFE), the London Metal Exchange, while the Tokyo Commodity Exchange is a major player in Asia.

NYMEX Trading FloorNYMEX trading floor. Source: jp.reuters

 

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What does the term “commodities” mean?

Before we delve into the world of commodity trading, it is necessary to clarify what actually lies behind this phrase. A commodity is a basic physical asset, often used as a raw material in the production of other goods or services. The commodity category includes agricultural products, mineral ores and fossil fuels – these are basically all kinds of natural resources used in our daily lives. To be traded on the markets, a commodity must be interchangeable and standardised with another commodity of the same type and species. Thus it is irrelevant where the commodity was produced or by whom, since two equivalent units of the commodity should have roughly the same quality and price. So, regardless of whether 1 ounce of gold was mined in the USA, Russia or South Africa, it will have the same value. In the past, commodity trading was done physically, while today most commodity trading is conducted online.

If you would like to start trading some of the most popular commodities online, then XTB is the place to be! We offer a wide variety of commodities to trade online through CFDs, including gold, oil, natural gas, coffee, and even copper or palladium! Find out more about trading gold below.

Start trading gold CFDs with Primal Trade

Different categories of the commodity market

Investors usually separate commodities into two groups. The first one is “Hard commodities” and refers to metals or energy resources that need to be mined or extracted from natural resources. This category includes, among others, iron ore, crude oil and precious metals. These goods generally have a long shelf life. The second group is “Soft commodities” and consists mostly of agricultural products such as wheat, corn, coffee, cotton, and livestock, including lean hogs and live cattle. Soft commodities are usually seasonal and often deteriorate quickly.

Another common classification of commodities is the division into 4 groups:

  • Agricultural – cocoa, sugar, cotton, coffee, etc.
  • Energy – petrol products like oil and gas
  • Metal – precious metals such as gold, silver and platinum, but also base metals like copper, iron, etc
  • Livestock – live cattle and general livestock and meat commodities

There is now a long list of different commodities traded, however investors, especially beginners, should focus on the most liquid markets, as this affects the ease of opening and closing trades. In other words, liquidity reflects how many entities are willing to buy and sell a given commodity, and whether transactions can be easily conducted.

Below, one can find a list of the most actively traded commodities according to the Futures Industry Association (FIA) data:

  • WTI Crude Oil
  • Brent Crude Oil
  • Natural Gas
  • Soybeans
  • Corn
  • Gold
  • Copper
  • Silver

 

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Characteristics of commodity trading

Commodity prices are constantly changing due to fluctuations in demand and supply, both in the economies of individual countries and around the world. Drought could lead to higher grain prices, while geopolitical tensions in the Middle East could push oil prices up. Other factors that affect commodity prices include:

  • currency movements
  • global economic growth
  • natural disasters
  • transportation and storage costs

Change in commodity prices between January 2020 and April 2020. Source: Bloomberg

Please be aware that the presented data refers to the past performance data and such is not a reliable indicator of future performance.

Therefore, commodity traders try to use the current trends in supply and demand, as well as other above-mentioned factors in order to generate profits. In turn, another part of market participants enter this market to diversify their portfolios by adding different asset classes to reduce exposure to the stock market. Also, another group of investors sees commodities as protection against inflation, because historically commodities have performed well in an environment of rising prices and low interest rates.

Most commodity trading involves the buying and selling of futures based on the price of the underlying physical commodity, although physical trading and derivative trading are also common.

After analysing, traders use contracts to take positions according to their thoughts about the future value of a given commodity. If they think that the price of a commodity will rise, then they buy futures, that is, they take a long position. If, in their opinion, the price of the commodity might fall in the future, then they are selling the futures – or going short. During the working week, traders can invest in commodities almost 24 hours a day.

How to trade commodities with Primal Trade?

Nowadays, there are many different ways for investors to trade commodities, from traditionally investing in the physical commodity itself, to trading futures or commodity options. However, the most popular way to invest in the commodity market are instruments called CFDs (Contracts for Difference) and ETFs (Exchange traded funds). CFD is a derivative instrument that is considered an efficient way to trade popular commodities due to access to leverage, which enables an investor to use less capital to gain greater exposure to an underlying instrument (which is associated with the risk of losing capital faster). Thanks to CFDs investors may profit from falling markets as well as rising ones. Through XTB, traders have access to a wide range of CFDs, including agricultural commodities (e.g. CORN, SOYBEAN), energy commodities (e.g. OIL, NATGAS), industrial metals (e.g. COPPER, ALUMINIUM), precious metals (e.g. GOLD, SILVER) and many others.

What Is CFD Trading?

Moreover, various ETFs enable investors to gain exposure to some commodities e.g. gold, silver, industrial metals or natural gas. Apart from that, investors might also seek indirect exposure to the prices of commodities. Investing in stocks, whose prices are heavily dependent on certain commodities, is another way of creating a diversified portfolio. As an example, copper mining companies rely on copper, which means that their shares are positively and significantly correlated with copper prices. The same scheme can be applied to other commodities (e.g. gold miners or oil producers). It is worth pointing out that such a solution may have an important advantage over direct investment in commodities as some companies may also pay dividends.

Our ETF scanner may be found helpful when looking for ETFs based on commodities. Source: xStation 5

However, remember to carefully analyse commodity price charts and other forms of research before making any transactions. The commodity market is very volatile, which often leads to sharp price movements that can lead to high profits as well as losses, therefore investors must be highly risk tolerant. In addition, an investment in commodities should only be part of an overall portfolio.

Oil demand fell sharply back in March 2020, when the pandemic started. Declines deepened in April 2020, when an oversupply of oil led to an unprecedented collapse in oil prices, forcing the contract futures price for West Texas Intermediate (WTI) to plummet from $18 a barrel to around -$37 a barrel. For comparison, gold (blue chart) also fell sharply in March 2020, along with other commodities. However it managed to regain ground in April 2020. This shows how the commodity market can be volatile at times. 

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Gold Trading – How to Start Gold Trading Online

by with No Comment Commodities

In this article you will learn:

  • How to Buy Gold?
  • Trading Gold CFDs
  • Gold ETFs
  • Gold Stocks
  • Best Time to Trade Gold 
  • Gold Trading Hours

Buying gold is seen as a safe investment by many people around the world – even those who do not deal with the financial markets. Gold has always been regarded as an asset that maintains its value due to its unique properties. The technological advances have created various ways to trade gold. This article is a quick overview of the basics of gold trading. 

How to Buy Gold

There are several common ways to buy gold. As gold is usually associated with its physical form, one might invest in gold simply by buying gold coins, gold bars or jewellery. This idea is certainly the most traditional one, but unfortunately it has many drawbacks – high transaction costs, high storage costs and low liquidity. The world has changed a lot in the past few decades. The liberalisation of capital movements and new technology made gold trading unbelievably simple. Apart from that, the financial markets have enabled investors to buy gold with incredibly low fees, or even with no transaction costs at all.

Trading Gold CFDs

Trading gold CFDs has many advantages, such as low fees and the opportunity to use leverage in particular. As leveraged gold trading requires only a certain percentage of the whole position, it is usually associated with experienced gold traders or gold day trading due to high levels of risk. Moreover, CFD gold trading also gives investors a chance to open short positions, which could be particularly useful in various gold trading strategies.

The best gold trading platforms are often linked to forex trading as well, therefore some people may use phrases like “gold forex” or “forex gold trading”, which is wrong by definition (FX or forex refers to currency trading). Trading gold CFDs is usually simple and convenient, as world’s top brokers enable gold trading online through their one-stop shop apps and platforms.

Gold ETFs 

Gold exchange-traded funds have become popular these days, as they offer an interesting alternative to accessing gold. Some say that buying gold ETFs might be a good way to invest in gold for beginners or for people who want to buy gold as a long-term investment, since the construction of ETFs is easy to understand.

So, how does one buy gold ETFs? It’s very simple, as gold ETFs act like individual stocks, and they trade on an exchange. This means that investors do not actually own the physical gold, but they still gain exposure to the commodity, as most standard ETFs (vanilla ETFs) hold a certain number of gold bars for each share of the ETF issued. As a result, ETFs track the value of gold and any change of gold prices is reflected in an ETF’s market price. 

Gold Stocks

Another way of investing in gold is to buy stocks of gold mining companies. In this case, investors gain indirect exposure to the gold market as gold producers are heavily dependent on gold prices. The outlook for such firms is usually bright when gold prices soar, as it is expected that sales and earnings of gold miners will advance as well.

Therefore, there is a significant positive correlation between gold prices and certain gold stocks. It is worth pointing out that gold mining companies may also pay dividends, which is a huge advantage compared to a direct investment in precious metals. This factor could be particularly critical for long-term dividend investors and it implies that in some cases buying gold stocks could be an even better idea than buying gold.

Please be aware that the presented data refers to the past performance data and such is not a reliable indicator of future performance.

Gold stocks are positively correlated with gold prices, which means that the shares of gold miners gain along with rising gold prices. On the other hand, gold stocks tend to fall when the price of gold dives. Barrick Gold Corp (GOLD.US) may be found among the largest gold producers in the world. Source: xStation5

 

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The Best Time to Trade Gold

Many market participants wonder what the best time to invest in gold is. Many traders refer to gold as a “safe haven” asset. This means that it is regarded as a relatively safe asset during tough times, such as during financial crises or recessions. There is no coincidence that central banks hold gold as a reserve asset, as it is widely expected that gold will preserve its value. Such reasoning also affects retail investors’ decisions, which is why gold is often found in investors’ portfolios.

Apart from that, gold may become particularly popular during high inflation periods. As rising inflation usually makes people concerned about the shrinking value of their money, gold is expected to serve as an inflation hedge. Even though the relationship between gold prices and inflation is not as significant as earlier (we have not experienced elevated inflation for many years now and quantitative easing programmes had their effects on this phenomenon too), buying gold may still be a wise move in countries with relatively high inflation. Gold is also regarded as an asset class, which could help investors build a balanced portfolio. This idea may be particularly compelling for risk-averse investors, as portfolio diversification may reduce risk and volatility.

Nevertheless, the relationship between gold prices and US yields has emerged following the global financial crisis. If investors buy US government bonds (known as US Treasuries), US yields fall, which is positive for gold markets. On the other hand, when investors decide to sell US Treasury bonds, US yields tend to rise, which is negative for gold prices.

The latter occurred at the beginning of 2021, as surging US yields pushed gold prices significantly lower. The phenomenon may be associated with soaring inflation expectations, which in theory would require central banks to act accordingly to the situation (including higher interest rates). 

Following the global financial crisis, the negative correlation between gold prices and US 10-year Treasury yield has become very apparent. Therefore, rising US yields usually lead to falling gold prices. Source: fred.stlouisfed.org

Gold Trading Hours

So far, we have discussed several aspects of buying gold. What about gold trading hours? While this shouldn’t really matter for long-term investors who have a time horizon of several years, it could be particularly important as far as gold day trading is concerned.

In general, there are two peak times of the day – European markets open and US markets open. European peak occurs around 8 am GMT (9 am CET). However, most activity in the gold market usually occurs following the US market open – by some estimates this peak can be even twice as big as the European one. The elevated volatility lasts from around 1 pm GMT (2 pm CET) until around 4 pm GMT (5 pm CET). This time may be a good period to look out for when trading gold.