Whether they are related to metals, energy or food, commodities are a very integral component of everyday life. Likewise, they have the capacity to be an essential option for investors to vary beyond conventional stocks and bonds or to gain profits from a conviction regarding price movements.
In the past, the majority of individuals had no interest in investing in commodities, given that significant amounts of expertise, money and time were required when doing so. Nowadays, there are quite a few different routes that can be taken to get to the commodity markets and a number of these routes ease the process for even average investors to participate.
It is the consensus of the majority of professionals on personal finance & chex systems news programs that getting an investment mix, which is broadly diversified is quite a prudent strategy. However, a number of investors are missing out on exposure to the market to this overlooked category.
Similar to real estate, stocks and bonds, commodities are an essential asset class. In essence, they are tangible assets that are used to manufacture good. Examples of commodities include textiles, timber, metals, livestock, energy and agriculture. The agriculture sector includes such familiar trade goods as wheat, coffee, corn and cotton.
A number of commodity ETFs or exchange-traded funds go along the path of total return indexes that are designed for the purpose of benchmarking the return of fully collateralized commodity futures. However, there are others who make investment in a just one commodity by taking physical delivery.
Below are investing tips for some of the commodities that are expected to head for price gains:
Over the next five years, the supply of copper growth will be slow and the demand is expected to increase, particularly from China as the infrastructure of the country and auto markets stabilize.
The year 2012 ended with copper at $3.61 per pound. The projection for 2013 is $3.90 per pound, which represents an increase of 8.03 percent from 2012. The projection for 2014 is $3.72 per pound, which represents an increase of 3.05 percent from 2012.
Additional construction-related and infrastructure stimulus from China should increase prices as 2013 progresses. However, in 2014, the existing level of supplies and high capacity for production will place a floor on prices.
The year 2012 ended with aluminum at $2087 per metric ton. The 2013 and 2014 projection is $2300 per metric ton, which represents a 10.21 percent gain from the end of 2012.
As a result of a weak demand and growing oversupply, nickel has remained at mid-2009 lows; however, it is expected to rebound steadily over the next two years.
The year 2012 ended with nickel at $17,448 per metric ton. The projection for 2013 is $18,300 per metric ton, which represents an increase of 4.88 percent from 2012. The projection for 2014 is $19,800 per metric ton, which represents a 13.48 percent increase from 2012.
The unlimited bond-purchasing program of the European Central Bank combined with the QE3 of the Federal Reserve, will keep pushing gold prices higher; however, prices could be limited by lowered demand in 2014.
The year 2012 ended with gold at $1665 per ounce. The projection for 2014 is $1800 per ounce, which represents an increase of 8.11 percent from 2012.
Investors are predicted to continue putting gold into and ira or 401k at record levels.
In 2012, a sharp drop in production in China assisted in cutting into the oversupply of zinc which dates back to the 2008 to 2009 financial crisis. In addition, the prices of zinc will be boosted if the new leadership in China supports infrastructure growth as well.
The year 2012 ended with zinc at $2040 per metric ton. The projection for 2013 is $2200 per metric ton, which represents an increase of 7.84 percent from 2012. The projection for 2014 is $2300 per metric ton, which represents an increase of 12.75 percent from 2012.
Ever since 2011, production at silver mines has stalled and the demand is expected to continue increasing, particularly for use in jewelry and electronics.
The year 2012 ended with the spot silver price at $30.
Incorporating commodities into an investment portfolio makes the provision for a greater level of diversification and this can significantly contribute to lowering the volatility of a portfolio. In addition, commodities have the capacity to provide a method of safeguarding against inflation.