Time to cotton on to trading
Opportunities and difficulties in the commodities bull market
THE PRICE OF COTTON increased more over the past year than that of silver, which in turn fared much better than big brother gold (see Finweek, 23 December 2010). Concomitantly, the cotton price pulled the wool price up along with it. Now farmers no longer want to slaughter their sheep: wool is worth more than mutton, with the result that lamb chops already cost more than R100/kg.
Oil is, of course, part of the commodity boom and that’s why we now have to pay more at the pumps for petrol and diesel, even though the rand is currently one of the strongest international currencies. But how and where do we deal in – “trade” is the correct word – this commodities boom is the question asked by many a reader over the past few weeks. In South Africa that’s unfortunately not quite as easy as simply buying and selling Absa’s ETF in gold, called GLD.
But, even so, there are many opportunities. For a start, the prospective investor should visit Safex’s website and study it thoroughly. You can have a lot of fun trading with Safex’s commodities – which can even be done on credit after paying an initial deposit of around 10%, actually called an initial margin – in something such as white or yellow maize in SA or corn in the United States. A speculator can enjoy himself playing around with those three commodities. Find out a bit about them and a whole new world will open for you.
Sunflower and soya beans offer equally good opportunities. In fact, they’re sometimes better, because the markets are so much smaller than that for maize, which means there can be price anomalies from which you can score – but also lose! Trading in both is so illiquid, major players can sometimes manipulate the market and if prices move against you, you can be hit hard. I’m very fond of this market myself, but I’m not going to be telling my tricks of the trade here.
Safex also offers opportunities to speculators – yes, let’s call them by their proper name – to trade in copper, gold, platinum, silver and crude oil.
The same rules apply to the buying of silver as to the buying of white maize. You open an account, sign a long declaration saying you understand all the risks and then you decide whether you want to buy or sell the product. That’s right: the option of selling short is just as conveniently available on Safex as the more traditional and, of