Investology

Commodities And Market Movement

In the trading arena, there are many methods people try to consider in order to determine the market’s next possible movement. An accurate prediction can help traders gain an advantage by making the right decisions for profit and gains. But predicting the markets can be quite an elusive challenge for many people. One reason is that you cannot just have control over the different factors that may govern market movement.

While it may be hard and difficult to predict market movement accurately, there are certain factors that may help traders determine the possible market direction. Commodities are some of the things that experts look into to help determine short-term market direction. They are more particularly interested in keeping track and monitoring some of the key commodities traded that have an effect on many aspects of people’s lives. Here are some of them.

Gold

Gold is a valuable commodity that many traders and investors look into. What makes gold such an important factor in determining market movement is that it appeals to both investors and non-investors alike. As jewelry, it is esteemed as a high-price item. As a commodity, it also has that effect in markets. In the traditional sense, gold tends to move in the opposite direction of the market. Many investors tend to dump their money into the commodity when the general market is trending lower. Other investors also use gold investments as a hedge to their other investments to counter the effects of a down market. Investors believe that when they see money pouring into the gold market. A possible downturn in the market may likely occur.

Oil

For being a highly valued commodity worldwide, oil can also have an effect on markets considerably. As the primary source of fuel that runs many world economies, it surely has an effect on how world markets move. Its price movement may affect different stocks in both ways. Surging oil prices can benefit stocks from the oil and energy sector. It may affect other non-related stocks differently, usually causing them to act on the defensive.

Copper

Copper is a commodity with a wide range of industrial uses. That is why it is also considered as a valuable commodity to monitor for determining market movement. It can provide hints of overall market sentiment since it can be considered as a measure of the health of the housing and manufacturing sectors in different countries.

Copper is considered as a volatile commodity. When investors see an increase in copper trading, they can see that many investors are taking more risks than usual. When the commodity price goes down, it indicates that investors are selling risky assets.

These commodities tend to affect overall market sentiment to a certain degree. How they do it may not be as easy as most investors would think. There are times when the general rule investors use when gauging these commodities do not hold true. Other factors in play may be affecting the market aside from them. When experienced investors keep track of these commodity prices, they consider it as just a part of the many other factors they use to gauge market sentiment. They do not solely rely on one area to make their decisions but also consider the many others and try to make sense of it all.
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Tags: Commodities, Market, Movement