Profit From Gold… Up, Down, Or Sideways!
Have you seen the price of Gold recently? It’s hitting new highs once again! If you’re an avid follower of the stock market, you know how Gold prices can influence many things… like the price of gold mining stocks. But I’m not here to talk about the gold miners.
I have another way to profit from jumping Gold prices… just give me a moment to explain.
Gold hit a low of $805 in January 2009. As of this week, it’s up more than 33%. What a run!
What’s behind the run-up?
Some traders are pointing to supply. Others point to demand. I point right to inflation.
Global economic activity is starting to pick up. Countries all over the world, including the US, are reporting modest increases in GDP. As you know, GDP is the measurement of all economic activity in a specific region. China’s GDP growth for 2009 will be over 8%.
Despite being on the road to recovery, we’re still in a fragile state.
A significant portion of GDP growth can be tied to massive government stimulus and spending. Now it’s not fair to point the finger only at the US government and Federal Reserve… though they do deserve a big share of the blame.
Governments around the world have freed up cheap money and let their printing presses run.
What comes with cheap and easy money is inflation. It’s a cycle that can spin out of control.
It’s what I’m afraid of, and it’s what’s driving the price of Gold ever higher.
But Gold’s not the only commodity out there.
Oil, Gasoline, Platinum, Copper, Lead…. There are hundreds of commodities out there. All of these are hard assets and they’re all moving slowly higher. Everyone knows when inflation strikes you want to be investing in hard assets.
Now, investing in individual commodities can be risky.
You need to study the markets. You need to pay attention to supply and demand issues. You really need to know what you’re doing when trading commodities… like Gold.
Just look at Wheat prices over the last year. Prices moved higher because planting was delayed… then prices dropped like a rock because the government estimated record harvests… then prices jumped again as harvest time weather was horrible…
While you could have profited from these moves, you could have just as easily lost money too. I’ve found an easier and simpler way.
Instead of investing in commodities, invest in the commodity market.
What do I mean by that?
Take a look at the CME Group (CME). They own the Chicago Mercantile Exchange, the Chicago Board of Options Exchange (CBOE), and the New York Mercantile Exchange (NYMEX). Every time someone makes a trade on one of the exchanges, CME captures a tiny little transaction fee.
The fee isn’t much. But when you handle millions and millions of transactions, the numbers get really big.
The company raked in $650 million in revenue in the third quarter of 2009.
Net income was $202 million for the quarter… that’s $3.04 a share!
We all know that trading activity in Gold and other commodities is going to pick up. Whether it is improved economic activity or inflation, commodities are going to move. As trading activity accelerates, one company’s poised to profit… and that’s the CME Group.
It’s a sneaky way to profit.
But remember, CME makes money regardless of where commodity prices move. Up, down, or sideways, CME is always a winner. If you like the idea of profiting from increased commodity trading, buy some for your own trading account.
Category: Currency Trading
