Traders can profit from the price movements of commodities like gold without actually owning any gold. The most popular way to do this is to derivatives trading – CFD trading with gold. Contracts for Difference (CFDs) are essentially temporary orders to buy/sell a pre-stated amount of gold. Profits and losses are determined by changes in the gold price while the contract is active. All gold CFDs have a contract duration.
The Copper Market
The USA used to be the main copper minor, however today most of the world’s copper is mined in Chile. Other countries producing copper in large amounts are China and Peru. Copper is traded around the world, the main markets are the New York Mercantile Exchange (NYMEX), the Mumbai-based Multi Commodity Exchange (MCX), the Shanghai Futures Exchange (SHFE) and the London Metal Exchange (LME). The copper market is open from 22:00 to 20:59 GMT.
What Affects the Copper Price?
Like most commodities, copper price changes based supply and demand. Copper is commonly used for different appliances, mostly for housing and electrical machinery. A decline in new house constructions can indicate a slower economy, which can result in a drop of copper prices.
Another factor is the supply itself. Should the supply from a region or country slowdown or even stop completely, it could greatly affect the copper market and change its price.
Copper is also used for different new green technologies such as environment friendly batteries and more. Green energies are on the rise as human kind is always searching for better solutions, and a growth in such technologies can bring about an increase in the price of copper.
Copper CFD Trading
It would be safe to assume that most people wouldn’t have a lot of use for large amounts of copper. Probably not even small ones. This is why they are traded for their contract for difference, or CFD in short. This means the trader does not buy or sell the actual instrument, rather trades on a contract with his broker, with the same prices and market movements as the real product. There are several advantages to trading CFDs:
Buying copper, much like any other metals, could be expensive. CFDs allow trader to employ leverage, meaning using only a small portion of the trader’s capital to open a position for a certain percentage of its value, and not the full amount. In the case of copper the leverage ratio is 10:1.
Not trading the actual instrument can save a lot of money on side expenses such as transporting, maintaining and storing it. This is why most of the metals, which require all these and more, are only used by its actual consumers.
In case of a sudden large change of value, owners of the product will have to find a way to dispose of their resources in order to make a profit or avoid a loss. When trading the instruments CFD on the trading platform, however, all the trader needs to do is simply close his position.