INTRODUCTION A commodity can be broadly defined as “a physical product, natural resource, or chemical that an individual can touch, taste, smell, mine, grow, consume, or deliver” (Lind Waldock, 2011). Commodities are fungible, meaning they are considered equivalent even though they may come from different producers. Because there is little product differentiation, commodity prices are fundamentally driven by global supply and demand (S&P, 2011). A. MAJOR CATEGORIES OF COMMODITIES Commodities are tangible physical products that can be broken into three major categories: industrial and precious metals, agricultural products, and energy. Industrial and Precious Metals Metals are classified as either industrial metals or precious metals. Industrial metals include base and ferrous metals such as aluminum, copper, nickel, zinc, iron, steel, lead, titanium, cobalt, tin, etc. These physical goods are generally used as production inputs. Precious metals are those that are rare and have high economic value. Precious metals include gold, silver, platinum, palladium, etc. While precious metals can also be used in an industrial capacity, they are generally considered to have intrinsic value. The higher value is driven by many factors including rarity, uses in industrial processes, and as an investment commodity. Investing in metals can be done either by buying the physical asset itself or through futures contracts. Another way to trade in metals is to invest in companies that explore or produce these metals, such as miners. As the economic environment continues to be uncertain, investors have tended place their funds in precious metals because they have an inverse relationship with currency strength and serve as a hedge against infla... ... middle of paper ... ...rieved July 18, 2011, from www.spindices.com/assets/files/commodities Securities Industry and Financial Markets Association. 2005-2010. “What You Should Know: Risks of Investing in Bonds.” Retrieved on July 16, 2011 from http://www.investinginbonds.com/learnmore.asp?catid=3&id=383 Superior Investor. “How to trade commodity futures.” Retrieved on July 12, 2011 from http://www.superiorinvestor.net/trading-options/commodity-futures.html Sun, Leo. Jan. 24, 2011. “Southwest Airlines’ (LUV) Profit Soars, Fuel Prices Loom Large” Retrieved on July 16 from http://www.investorguide.com/article/7628/southwest-airlines-luv-profit-soars-fuel-prices-loom-large/ Wiley Publishing, Inc. 2011. “Understanding the Real Risks Behind Commodities-For Dummies.” Retrieved on July 16, 2011 from http://www.dummies.com/how-to/content/understanding-the-real-risks-behind-commodities.html
1. What are the primary business risks associated with UST Inc.? What are the attributes of UST Inc.? Evaluate from the viewpoint of credit analyst or bond holder.
Gold is a particularly volatile commodity that has not been traditionally hedged against price risk, but over the years many firms in the industry have adopted risk management strategies with great enthusiasm. Particularly zealous is the American Barrick Resources Corporation. The company embraced risk management and even incorporated it into one of its main business objectives. Over the years American Barrick has grown into a successful and fast-growing firm, however after discovering abundant ore deposits in a recently purchased mine the company is particularly exposed to price risk. The price of gold and interest rates are at historically low levels and American Barrick is unsure of how to proceed.
With the current fluctuations in currency value, it has become necessary to come up with a safer way of storing wealth. Inflation causes loss to creditors as well as debtors. To curb this loss, it is important to consider safer ways of investing your money such as purchasing precious metals. Among the most valuable metals in the current market are gold, platinum, silver and palladium bullion coins. To help in identifying the most suitable venture, here is an extensive evaluation of various bullions.
When asked about investing, many people imagine a crowded building in New York with thousands of stock brokers in their different crowds for different stock. Many people do not consider investing in one of the most common jewelry metals. Gold can also be a good investment economically as the demand is increasing quickly as more and more household and industrial components and different jewelries are being produced, and even some uses, like NASA’s uses, many people have not thought of. However, the supply is increasing at a much slower rate. In 2003, gold was being consumed, through creation jewelry, electronics, etc., at a rate of 120 million ounces per year; however, the rate at which gold was being produced at that time was only 80 million ounces.
In a capitalist system, once an object emerges as a commodity that has been assigned
The practice of trading and bartering of commodities has been around since the beginning of time. The concept of commodity chains was developed by Terence Hopkins and Immanuel Wallerstein in an attempt to understand the spread of capitalism and economic change. (Bair & Werner, 2011) The emergence of capitalism has brought about an anthropogenic phenomenon know as globalization as a means to create profit and in doing so altered competitive dynamics (Gereffi 1999). Globalisation of economies has lead to the construction of chains of production, distribution and consumption transcending borders across the world. Gereffi (1994) identified these chains as Global Commodity Chains, using them as a method to analyze the global economy.
In this essay, I will conduct an economic analysis of the coffee bean market to explain how the short and long run affects price fluctuations, and whether or not government intervention should be used to stabilise prices to benefit the growers. The assumption of demand and supply is that as demand is increased, supply will need to increase to maintain the market equilibrium. Arguably the consumer has very little influence on the levels at which demand and supply operate at, though this is contested due to the fact that a product cannot be sold unless it is demanded(desired) by a consumer. Although increasing and/or decreasing either the demand or supply of a product creates a new market equilibrium, it is usually short lived and we expect
Commodity risk is the potential loss due to an adverse change in the prices of the commodity. These commodities
Some of the commodities in the article are explained as being fixed, implying that they cannot be transferred, except for the title. Also, this includes land, mining, logging and fishing rights. In this context within the article, the value of a fixed commodity is derived from the utility and the potential rate of extraction. Bulk commodities are represented as commodities that can be moved, which includes grains, metals, livestock, oil, cotton, coffee, sugar and cocoa. There amount comes from utility, supply and demand (market
According to Kotler and Armstrong, “A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need.” Product constitutes one of the four P’s of the marketing mix and entails both the physical products and also the services that comprise all the offerings of a company to the target market. Product can also be further sub-divided into two categories comprising; firstly consumer products and secondly industrial products. Consumer products are bought by final consumers for personal consumption. They can be broken down to tangible and intangible (services). Examples of tangible are laptops, cars, books, games. Examples of intangibles are insurance and haircuts.
goods or services. This value is necessary because the economy needs to see that the
There are many famous precious materials that the everyday person knows of. Gold, silver and in more recent times platinum are all known for their scarcity and desirability. However it is a crystalline form of carbon, not a precious metal, which carries more prestige than all three of them together. The diamond. Ever since the Kimberly diamond rush began in 1866, diamonds have played a very distinct role in our society. We are taught from an early age on that diamonds are extremely valuable due to their unrivalled beauty and apparent rarity.
Ans. Commodity Finance means funding of the commodity trading. It is a type of trade finance where a company in the commodity market is funded by the investors to make maximum output and repay the loans to the investors when the exports of commodity begins. A commodity can include metals and mining (hard commodities), agriculture crops (soft commodities) and even energy.
As it was mentioned before one of the alternative types of investment is gold. Gold is the most popular precious metal in the world. The biggest advantage of investing money into gold is the fact that gold is a liquid asset which can be easily converted into cash. Laurent (2016, pp. 11-13) described that in the world exist
Remember to consider the cost of an investment against your expected return. Depending on how much your bank will charge in commission, you should avoid buying bonds, shares or ETFs in too small chunks.