Oil and Other Precious Commodities

08pet1The market value of raw material in the world is called as commodity prices. The lives of every common man are touched by some commodity such as gold, oil, wheat, natural gas and wood. Besides this there are ninety other assets on commodity exchange. It is easy to consider that natural gas and oil as important items to invest in but so are also gold and silver. Mutual funds can also offer investments in commodity related business houses.

Commodity prices are controlled by demand and supply. As there are no digging taking place and no new mining shafts is looked into it is safe to say that rising prices and tight supplies seem to be the winning formula right to the finishing line. Whenever inflation rises commodities also rise. However any gold investor will tell you that commodities can change so fast in prices that one’s head could also go for a spin.

commodities01Gold does not pay interest and costs money to store. However oil is a commodity that we all know that once it is gone then it is gone so it is very important to know how much oil is needed currently to maintain our level of existence. As the world oil production increases more companies depend on oil power generation to keep themselves alive. Gold on the other hand is the future of all precious metals .Investing in gold needs patience and knowledge about watching the market and knowing when is the best time to buy or sell gold

refineryGold has been hovering at a five year low. It is then that investors started selling gold hoping for a potential rise in the interest rates in the States. Spot value is the common term used for an ounce of gold. It is the most common metal bought by small and medium buyers. It is the immediate exchange for cash. That is why it is said that gold is always good. If the spot value of the asset is higher than the future price then situation is called backwardness. It is possible then it indicates uncertainty about future availability of the commodity.

Gold is the only metal that has an over the counter market. What this means is that those who buy and those who sell are not matched by market. The major spot markets are in China, London and New York. Each spot market has a list of people who determine the value of gold. The size of gold has also its value and is measured differently. Gold bars vary in size from hundred to four hundred ounces. At the rate of eight hundred dollars per ounce it means that each bar is valued at eight thousand to thirty two thousand dollars. The transaction of gold can be up to half a million dollars. A spot value shows the market and its expectations of further price movement and this is set in commodity exchange in New York and London. It is because of the barriers only few large buyers can take part in the spot markets.