Gold Remains Cheap, But For How Long?
How to Identify Commodity Stocks to Buy in 2022? Identifying the best commodity stocks to buy is based on the law of supply and demand for these commodities on the international market.
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Home Saving Gold & Commodities Gold remains cheap, but for how long? Gold & Commodities
By Sophia Ava YEET MAGAZINE | Updated 0439 GMT (1239 HKT) February, 2022
Which commodities to invest in 2022? best commodities to invest in 2021 best commodities to invest in right now best commodities to trade for beginners how to trade commodities online
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Which Stock To Invest In The Stock Market In 2022?
Gold Remains Cheap, But For How Long?
2021 will have bewhich commodities to invest in 2022en a disappointing year for gold holders, with lateralization at times far from its peaks. For those who are not already positioned, this is an opportunity to do so.
We saw in a previous article that 2022 would be a "golden year", according to Ronald Peter Stöferle (RPS), analyst at Matterhorn Asset Management and co-author of the In Gold We Trust report. Let's continue today to watch his predictions on the price of gold.
In addition to inflation that will remain at high levels and a monetary policy that will remain very accommodative, RPS estimates that the current year will be characterized by real interest rates that will remain negative: the "foundation of any bull market in gold “, as the Austrian analyst reminds us.
2021: a disappointing year for gold
However, it could be objected that the year 2021 was characterized by very sharply rising inflation and falling real interest rates, to the point of reaching more negative levels than ever. However, at the same time, the price of gold moved sideways and the metal recorded disappointing annual performances (a drop of 3.5% in dollars and a rise of 2.9% in euros).
RPS must also be the first to be disappointed with these results, since, in the In Gold We Trust 2021 report, he estimated alongside Mark Valek that there was "a probability of almost 45%" in favor " an ounce to $2,100 or more by December 2021”…
Here is how RPS reacts to this finding:
“This sideways movement is […] not a sign of gold's decline, but of its fundamental strength. To listen to the big nervous of the gold community, one would think that the price of gold has just collapsed by 50% or more [in 2021].
However, if we broaden the perspective, the performance of gold, which has oscillated in recent months between $1,700 and $1,900, looks more like a temporary breather than the start of a bear market. »
RPS therefore attributes the disappointing performance of 2021 to the account of a bull market which remains healthy rather than racing, after two exceptional years.
Stock markets don't like inflation
RPS then provides us with this graph which shows that "the headwind of inflation turns into a headwind [for equities] when the inflation rate exceeds the 4% mark" - a relationship discussed in detail in the In Gold We Trust 2021 report .
And the analyst adds:
“When this bubble starts to burst, which is when the ever-increasing stock market loses its artificially heightened appeal, gold will benefit. […]
Gold is an excellent hedge against stock market corrections. This is confirmed by the fact that the metal recorded a small average gain of 0.2% during the S&P 500's weakest 20 weeks since 2000. Other asset classes, such as the HUI [Editor's note: the NYSE Arca Gold BUGS Index] (-0.8%), Silver (-0.8%), Commodities (-0.9%), Crude Oil (-1.0%), MSCI World (-2.9%) and the S&P 500 (-3.3%), on the contrary, were in negative territory. »
Gold remains relatively cheap
RPS ends its development by recalling that “compared to the historical highs of 1980 and 2011 [in dollars], gold still looks cheap in relative terms”:
RPS concludes its 2022 prognosis with these words:
“Two big steps forward, one small step back – such has been the pace of gold [in dollars] over the past 6 years. If gold continues at this rate, the years 2022 and 2023 will indeed be golden years. And what is certain is that the orchestra is already playing. »
No quantified targets for the price of gold by the end of the year therefore, but the conviction that the price of gold in dollars will be higher on December 31, 2022 than on January 1 (1 $809).
2022… and then?
At a 10-year horizon, the Incrementum forecast remains unchanged: Stöferle & Valek (S&V) have been forecasting since May 2020 a gold price that will rise to around $4,800 by December 2029.
And the two Austrians specify that “the distribution is clearly skewed to the right. This means that significantly higher prices are much more likely than lower prices. The target of $4,800 an ounce by December 2029 is therefore a conservative objective from their point of view.
If the money supply were to grow at the same pace over the next 10 years as it did in the 1970s, S&V believe that "a gold price around $8,900 [would] be realistic here 2030”.
In May 2021, they estimated that the assumption of a gold price around $8,900 by 2030 had become even more likely than it had been a year earlier.
More than just the year 2022, S&V are therefore convinced that "given the unique combination of circumstances", it is "the 2020s [which] will go down in investment history as a golden decade"!
ARE YOU AN INVESTOR?
THESE ARE FREQUENTLY ASKED QUESTIONS ABOUT COMMODITIES
Which commodities to invest in 2022?
1. Best Silver Mining stocks
It can be seen that the industrial demand for silver is increasing. Like the energy sector, more precisely the producers of solar panels are its biggest customers. According to various analysts, it is very likely that demand will continue to grow as panel production develops. The best stocks to invest in silver are Silvercorp Metals Inc. (SVM), Fortuna Silver Mines Inc- FSM, First Majestic Silver Corp- AG and Pan American Silver- PAAS .
2. Best Uranium stocks
Uranium is used as fuel in nuclear power plants and accounts for 11% of electricity production. The need for uranium is therefore stable or even increased, because green energy is unable to meet the need. So there is always a demand for nuclear energy. But to produce electricity from nuclear energy you need uranium. Here are some of the best Uranium stocks: Cameco- CCO- CCJ, Uranium Energy- UEC and NexGen Energy- NXE, etc.
3. Best Lithium stocks
Automobile manufacturers have a strong need for cobalt and lithium in the manufacture of batteries. It is for this reason that many investors are interested in this raw material. It should be noted that, best lithium stocks are Albermale Corporation (ALB), Sociedad Quimica y Minera de Chile (SQM), Advanced Metallurgical Group (AMG) and Livent Corp. (LTHM).
4. Best Coffee Sector stocks
Currently, coffee consumers are increasing, which is why the demand for coffee is increasing. So, if you want to invest in this sector, you can buy them in physical or CFD or through the following interesting coffee sector stocks: Starbucks (SBUX), JM Smucker Co. (BMI), Nestlé SA (AQUA) and Luckin Coffee (LNN) etc.
5. Better Copper stocks
Copper is an element widely used in construction, plumbing, electronics and mechanics etc. Given its multiple functions, its share price is linked to the evolution of the world economy. So, if you want to invest in it, you have to follow world news and technical analysis of the price of copper. To invest in copper, you can buy physical copper or through derivatives such as futures or through the ETF (Exchange Traded Fund). But there are still other options, such as buying shares of companies active in copper mining such as Glencore (GLEN), Freeport-McMoran (FCX), BHP Group (BHP), Lundin Mining (LUN) and Norilsk Nickel (MNOD) .
7. Best Natural Gas stocks
We need natural gas in the production of electricity and heat. This is why the demand for natural gas is too high in winter, especially for heating. The air conditioning also needs natural gas. Therefore, for this reason consumption also increases in summer, in periods of high heat.
Global warming accentuates this trend. This shows us that natural gas is always in demand in winter as in summer. If you want to invest in it, the market is open six days a week, 23 hours a day, with a one-hour break each day. In this sector, one can also invest in ETFs. ETFs that allow natural gas to be traded are the United States Natural Gas Fund (UNG), ProShares UltraShort Bloomberg Natural Gas (KOLD), ProShares Ultra Bloomberg Natural Gas (BOIL)and United States 12 Month Natural Gas Fund (UNL).
10. Best Corn stocks
Corn is one of the most interesting and popular listed agricultural commodities in the financial markets. In addition, corn has interesting prospects in the longer term (very interesting for players speculating strictly on the long term). To invest in corn, the easiest way is to use CFDs.
11. Best Wheat Stocks
Wheat is among the predominant staple foods around the world. Wheat speculation can be done on several exchanges, but there are two main exchanges listed for wheat futures: the Chicago Board of Trade (CBOT) and the NYSE Euronext (Euronext) .
To go further, also read: How to Buy Stocks in 2022? The Beginner's Guide
How to Buy the Best Commodity Stocks on the Stock Exchange Market?
- Go to a regulated and reliable online broker such as the DEGIRO broker, which notably offers you the lowest brokerage fees compared to others.
- Sign up with this broker to create an online trading account in minutes by filling out a simple form.
- Make your first deposit of capital through a payment in order to fund your account. This capital will be used to make your investments.
- Identify the best commodity stocks to buy and place your stock market orders.
How to Identify Commodity Stocks to Buy in 2022?
Identifying the best commodity stocks to buy is based on the law of supply and demand for these commodities on the international market. If the supply decreases, the demand increases and vice versa, when the supply increases it directly impacts the price on the market. So if you want to identify the best commodity stocks, you have to follow the news and technical analysis. Nevertheless, crude oil is still in demand, but it should be remembered that the price of this stock is very volatile.
Should we Bet on Commodity Equities in 2022?
Yes, it is very interesting to invest or buy commodities for the following reasons:
- As raw materials, they are still in high demand to produce a finished product.
- Commodities are an asset class of choice, as are currencies. Therefore, the short-term fluctuations are significant and the prospects for gain are high. However, like all stocks, there is a risk.
- If you want to diversify and protect your securities portfolio, it is important to run to them.
- Commodities show performances, as we have seen on the evolution of the S&P GSCI index, a synthetic index composed of 24 commodities from all sectors.
Is Investing or Buying the Best Commodity Shares Still a Good Idea?
Investing or buying the best commodity stocks is still a good idea, as they are always in demand in daily life, especially in the manufacturing industry. Moreover, some of them are considered safe havens. However, before choosing the best commodity stocks to buy, one must follow the news in order to know the trend in the international market as well as technical analysis and fundamental analysis.
What Strategies for Trading or Buying the Best Commodity Stocks in 2022?
1. Day Trading Commodities
This is a one-day trading technique, ie short-term trading. This consists of opening and closing positions on the same day. This method is valid for trading or buying commodities, in particular via the leverage effect they present. This leverage effect is an element that accentuates market effects. Nevertheless, given that the operations are focused within the same day, it is necessary to remain on standby so as not to miss the opportunities each day.
2. Commodities Swing Trading
Swing trading or medium-term trading means that your trading is focused on variables that will have more weight in the medium-long term. By applying the trading strategy over a longer period of time like swing trading, you need to have a consistent reading of more macro-economic variables.
For example, if you want to invest mainly in agricultural commodities, you must remain attentive to weather conditions and the world's largest producers for each product. For you investors who use swing trading, it is very important to use technical analysis in particular to have the graph of the evolution of the price of a given asset.
3. Scalping on Raw Materials
Scalping is a shorter trading strategy than day-trading. In this option, you have the possibility of making a large number of round trips between opening and closing positions during a day. To do the scalping, you have to take into account the micro movements of the market. As with day-trading, scalping is also very compatible with leverage, which will accentuate market fluctuations, even in the very short term.
4. Trade with Expert Advisors on Commodities
To trade or buy commodities, you can use expert advisors, ie trading robots. With this technique, you carry out your trading automatically. There are two options for this kind of trading:
- The first option is to create your own trading robot based on market parameters that you consider important. In this case, you need to familiarize yourself with the different programming languages.
- In this second option, you use the trading robot of other traders or other specialized companies.
With trading robots, you configure a number of parameters to better understand the favorable time to buy or sell, at what price and under what price conditions closed its positions. If the Expert Advisors are well configured, you have the chance to save precious time but also be extremely lucrative at the same time.
Should You Invest in Commodities?
It is necessary to invest or buy raw materials on the stock market for the following reasons:
- Raw materials are the essential building blocks for making the products we need in our daily lives.
- As real commodity assets, they hedge inflation and have intrinsic value. When the intrinsic value increases, their prices also increase to maintain constant their value in use.
- The performance of commodities is poorly correlated with that of the main asset classes (stocks, bonds, etc.), so you can diversify your portfolio with them.
- Some raw materials are considered safe havens. So, it is interesting to invest in it to protect yourself in the event of a financial or economic crisis. For example, gold is among the safe haven par excellence.
- Certain raw materials, such as oil, because of its rarefaction and its vital importance in the modern economy, can generate opportunities for significant gains.
Commodities Market: Principle and Operation
Commodity trading can be carried out in different options:
1. By trading the physical asset
In this option, that is to say by trading the physical asset, your gain or your loss will be directly correlated to the evolution of the prices. When you trade the physical asset, it means you must be able to store that asset. But you should know that a raw material is more difficult to store than a share or a bond. In this case, you can also find an intermediary capable of storing your raw materials, but this will have a cost. So, to trade commodities, we recommend that you go through CFD trading, with a reliable broker like Vantage FX .
2. By trading CFDs (Contract for Difference)
In this alternative, it is necessary to go through contracts whose terms are defined in advance. At that time, the investor pays for the contract on the subscription date. In this case, when the price of the commodity rises between the subscription and the expiry date, the trader will earn a capital gain. But otherwise, he will lose money.
3. In ETFs (Index Funds)
It is also an interesting channel for investing in commodities , while having a lower level of expertise. With ETF's you can have liquid access to commodities. ETF's can also be traded like shares and can faithfully and regularly reproduce the variations of an index. For this option, access is easy and less expensive.
Apart from all this, you can adopt other strategies to expose yourself such as buying securities of listed companies active in these areas, for example, for Gold, shares of Franco Nevada or Barrick Gold-USD . With there, the possibility of receiving dividends.
The 5 Tips to Follow Before Choosing the Best Commodity Stocks to Buy
1. Determine Factors That May Influence Commodity Actions
First, you need to know the supply and demand for the commodity you want to buy. This has an impact on the price of the best commodity stock to buy. For example, if you want to buy gold, you have to identify the demand from jewelers, institutions, speculators, etc. Similarly, if you intend to trade oil, geopolitics and understanding the stakes are decisive elements to know in advance the fluctuations of share prices.
2. Diversify your Portfolio
When trading commodities, it is important to choose products whose prices are not linked. For example, soybeans and cattle are two commodities that are linked, the evolution of the price of soybeans having an impact on the price of cattle, in this case your investments are not diversified. On the other hand, gold and cocoa are not linked, so your portfolio is more diversified.
But in general, we advise you to have recourse to other assets such as stocks or government bonds. You can also invest in cryptocurrencies in order to diversify your portfolio.
3. Pay Attention to Leverage
You have to be careful about the leverage term, especially for novice investors. Leverage can make you win a lot, but it can also make you lose everything.
4. Understand Take Profit and Stop Loss well
As we know Stop Loss and Take Profit are two vital elements for your trading. If the price of the asset decreases, it is the Stop Loss level that comes into play. On the other hand, if it increases, it is the Take Profit level that comes into play. These are therefore your thresholds minimum and maximum resale. When the price of the asset goes below or well above, your asset will be resold automatically. If you analyze your positions using support and resistance levels, these elements can be decisive for properly setting your Stop Loss and Take Profit thresholds.
5. Consider Technical Analysis Tools
Technical analysis tools are widely used as decision tools for many assets including the best commodity stocks to buy. Through the results displayed by the tools, you can know the trends on the evolution of the courses. Currently, there are a good number of indicators, but the use of all of them risks being counterproductive, which is why we recommend that you consider 2 or 3 tools. The most used tools are Bollinger bands, MACD or moving averages and pivot points .
Invest or Buy the Best Commodities Stocks – What Future – Opinion?
Today, an expert thinks that the demand for edible raw materials could grow strongly in the near future. Moreover, the majority of the population is moving towards a vegetarian diet, that is to say, it only consumes products of plant origin.
If this population group no longer eats meat, it must compensate with other products such as starches or cereals. Indeed, if the world demand for meat decreases, that of cereals increases considerably. So, before choosing the best commodity stocks to buy, you have to follow the global trend in the field.
Conclusion – Things to Remember about the Best Commodities Stocks to Buy
Each raw material has its specificity. Like oil, it is very volatile and having an opportunity for significant gains, gold is considered a safe haven, others are generally considered more stable. So, before investing in it, it is very important to identify all the elements that can influence the prices of these raw materials. By taking into account, for example, geopolitical events or climatic hazards. In fact, you have to be reactive when investing in commodities.
What is a Raw Material?
In general, raw materials are all products that can be used to make a final product. In this sense, wood can be the raw material of a table. In the financial world, commodities are assets that can be traded on financial markets. There is a very wide variety of raw materials. For example, you can invest in gold, oil, gas, or even cotton.
What Affects Commodity Prices?
As with any asset, the price of commodities is largely guided by the law of supply and demand. Good to know: Through taxation or legislation, the public authorities can have an impact on the price of a raw material.
Is Commodity Trading for Beginners?
Yes, it is quite possible to trade commodities as a beginner. Nevertheless, it is necessary to understand many variables, which is why we recommend training sufficiently in advance of an investment in this type of product.
How Much Money Can I Earn Trading Commodities?
As with any asset, your return will mostly depend on how much you invest and what commodities you invest in agricultural and mineral commodities.
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