Commodities such as gold, silver, copper, oil and even wheat have long been used by investors as a form of asset diversification. It also can serve as a useful hedge during times of market uncertainty. In other words when the stock market falls and investors panic, quite often there will be a flow of ‘hot money’ away from equities and towards other asset classes including fixed income products (bonds) and commodities. Gold in particular is generally inversely related to the stock market and so can act as a hedge, albeit imperfect.
Of course as an investor you probably don’t want to buy the physical commodity but simply want to gain exposure to the underlying share price. After all taking delivery of 100 barrels of Brent Crude is clearly impractical which is why there are a number of products including futures and ETFs which will allow you to attain exposure to the price of the commodity without having to physically own it.
Risk Warning - All investments carry risk and prices may change quickly. The value of your portfolio can go down as well as up. Past performance will not necessarily be repeated and is no guarantee of future success. You should carefully consider in light of your financial resources whether investing in stocks and shares is suitable for you. This notice cannot disclose all of the risks and other significant aspects of investing in equities, derivatives, bonds or any other investment product. A full list of risks will be provided for the products which you are interested in. For more information please contact one of our team.