Financial Spread Betting And Commodities
Let us look at how spread betting can be used to trade commodities like precious metals. As is well known, precious metals like gold and silver apart from other metals like copper, aluminum have been favourite commodities and have been traded actively both in the physical as well as in the derivative markets in which margined trading has been a significant contributor.
Silver has emerged over the last one year as a hot precious metal with its consumption rising rapidly. China has been one of the major consumers of this metal and has even been extolling its citizens to switch from gold to silver for their investments. Gold has always been the precious metal of choice for many people in all parts of the world when it comes to investment as well as margined trading. However, recent money printing by the US in order to raise stimulus package resources has raised the specter of increased inflation and the apprehension that the purchasing power or the value of currency would go down significantly. China in particular would be very concerned if that happens since they hold a huge amount of US dollar securities. If the value of the dollar goes down, they would lose their investment value and that is one of the major reasons for them encouraging their people to invest in silver as a possible hedge not only in the physical market but also in the spread betting market.
One more reason for silver becoming popular in the spread betting trade is due to its very high application in industries. A lot of silver goes into the manufacture of electronic items as well as in the pharmaceutical market. Though a lot of silver is now saved from usage due to digital photography, usage has increased in other areas fuelling demand. People are therefore now investing in silver in the form of coins, ETFs, futures as well as margined trading.
Some tips that are helpful in spread betting this precious metal and you should know are as under:
a) Spread betting bets in silver would expire on a daily basis versus the cash price. Some margined trading firms would offer you this facility without any spread charges.
b) Ensure that you use guaranteed stop loss mechanisms when spread betting so that losses can be minimized should there be a rapid and sudden fall in prices. Silver tends to outperform gold and you should therefore be careful in your margined trading positions.