In The Money: How to invest in the red-hot commodity market
In this fortnightly series, we address readers’ queries on investing issues. This week, we look at investments in the red-hot commodity market.
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Lee Su Shyan, Cheng Chye Hsern and Evy Wee
Q: With the rise in commodity prices, what are some of the ways that retail investors can participate in these commodity price gains?
Riding the commodity investment wave
OCBC saw customers’ investments in gold and silver increase more than three-fold in the first quarter of this year.
PHOTO: REUTERS
As people feel the pinch of the commodity price increases - from rising petrol prices to cooking oil - are there investments in the commodity market that can ease the pain?
Investing in commodities can be a way of diversifying an investment portfolio but it also comes with its fair share of risks, including natural disasters that can wipe out your gains overnight.
Commodity prices likely to rise further
Indonesia took steps to reimpose the domestic market obligation ruling on palm oil producers after announcing export resumption.
PHOTO: EPA-EFE
As inflation surges, commodity prices are in the spotlight, and analysts and experts say the only way is up for the foreseeable future, which means pain for all of us.
Mr Avtar Sandu, senior manager of commodities at Phillip Futures, said: "We have a perfect storm for inflation as well as higher commodity prices - supply shortfalls, pent-up demand, inventories at low levels and weather affected by climate change." Another reason is that most commodities are traded in US dollars, which have appreciated as interest rates rise there. This in turn raises the price of commodities yet again.
Invest in commodities via ETFs, listed stocks and physical product
Investors can add some commodity exposure to their portfolios in many ways.
PHOTO: AFP
Investors can add some commodity exposure to their portfolios in many ways.
The simplest is to use an exchange-traded fund (ETF) that tracks the price of a given commodity.
Gold can hedge against higher volatility, macro headwinds
Wheat grain cascades on a delivery truck at a mill in central Fayoum, Egypt.
PHOTO: BLOOMBERG
With commodity prices rising in recent months, there has been more interest among retail investors to invest in them as a means to diversify and hedge their portfolios, given rising inflation and geopolitical risk and volatility.
One way is through commodity derivatives products such as futures contracts.
