by Geoff Ho
Any traders worth their salt know that volatility is the key to making money - but given the coverage oil and gold receive, you could be forgiven for thinking that these are the only two commodities worth considering.
This is clearly not the case. If it were, the spread betting companies would not have bothered making more than 40 other commodity markets available to their clients, with plans for many more on the way.
These markets include metals - the likes of gold, silver, palladium, platinum and base metals - plus agricultural commodities such as live cattle and soy meal; energy bets including oil and natural gas, and the more esoteric markets such as carbon emissions.
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In fact, if you have ever watched the film Trading Places (which stars Eddie Murphy and Dan Aykroyd and is arguably the best film ever to feature commodities) and have always wanted to trade pork bellies or frozen concentrated orange juice futures just like they do in the movie, you can do just that thanks to the spread betting providers out there.
The thing about commodities is that prices in any given market could leap or tumble in a blink of an eye. And thanks to the returns/losses they have made on gold and oil, a growing number of traders are now scouting around for the next big trading market.
'Thanks to gold and oil, commodities are now seen as volatile and the spin-off of that is that we are seeing more and more people looking at the soft commodities [foodstuffs such as cocoa, sugar, and Coffee] and trading in other precious metals such as platinum and palladium,' says Martin Slaney, head of spread betting at GFT Global.
This change in traders' attitudes is just as pronounced in the CFDs market, where according to Blue Index head of dealing Richard Curr, platinum and sugar are seeing more action. On the London Bullion Market, silver has gained more than 50% to $11.14 a troy ounce over the past year, which is impressive enough. But what has drawn traders is the silver market's increased volatility - over the past month the metal has traded sharply up and down between $11.74 and $10.70 an ounce. 'Silver has received a lot more attention from traders in recent times.
Sugar has been pretty wild too and has generally seen a lot more interest over the past six months,' says Curr. 'But people do not really care what it is they trade as long as it moves. Gold and oil has it [volatility] and now we're seeing it in silver and sugar.'
In general, spread betting companies do not charge clients anything directly, apart from financing costs on long (buy) bets, making their money by adding to the market spread on individual shares, indices, commodities and currencies.
Silver has been so volatile in recent sessions that according to City Index's chief market strategist, Tom Hougaard, the spread betting outfit has widened its spreads to compensate for its effects. 'Silver is the new Dow for traders,' says Hougaard.
'Thanks to gold and oil, commodities are now seen as volatile.
We are seeing more and more people looking at the soft commodities ...
and trading in other precious metals such as platinum and palladium'
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