Commodity Speculation - Big Profits Invite Big Money
Part 4. Commodity Speculation - How The Commodities Market Has Morphed Into A Speculative Haven
Commodity Speculation could be considered a big boy’s game.
However, there is a way to participate in it while properly managing your exposure to the dangers involved.
The Commodities Market has morphed into a beast far more ferocious than anything that was intended upon its conception.
Commodity Speculation has become a preferred instrument for huge Money Managers and Hedge Funds - many of which control more money than some entire countries.
Commodity Speculation - More Powerful Than Before
Back in the1980's, a trader was heavily shorting the British Pound (£), thereby devaluing the British currency.
The British government issued a warning that the said behavior should be stopped and it was stopped.
Implicit in that warning was that the British Treasury could have come into the Market and start to buy back the Pound thereby causing severe financial damage, if not ruin, to those who were shorting the Pound.
Unfortunately, over the years the muscle of single governments has diminished because of the immense and rapid growth of the massive well healed money managers like hedge funds.
The Commodities Market has become a favorite playground for them.
Only a few single governments today have sufficient clout to stem the activities of rogue traders with deep pockets in the Commodities Markets.
It is illegal for traders to collude, but when they act, they leave such giant footprints that it is easy for others to follow.
Governments have learnt, though, to act in concert to thwart rogue activities.
The promise of big profits, invites the entry of big money, hence the rise of commodity speculation.
The point is that wherever there is great potential to make a lot of money, big money will find it.
As a result the inevitable happened - rampant commodity speculation!
An entire industry of speculators emerged; those who just bought and sold the commodities without taking possession or ever having possession of the commodity to make delivery.
They couldn’t take or provide delivery, so they had to get in and out of contracts before the delivery dates. This also added to volatility especially close to expiration dates.
Sure they added an enormous amount of liquidity to these markets but they also heightened the volatility of these markets.
So how could you participate in these volatile markets and enjoy the huge potential gains while circumnavigating the precipitous and dangerous pitfalls?
By using ETF’s (Exchange Traded Funds).
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