Commodities Spread Bet - Spread Bet on Gold
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Investors are still flocking to the 'safe haven' of gold. The current problems in the credit markets have pushed many investors to the perceived safety of gold. However strong demand for the metal from India and China has also helped keep the price high. The current price of the Gold (October) market is $703.2 - $704.0 with FinancialSpreads.com.
As with many markets, you can spread bet on the value of commodities. In this case you can spread bet on Gold (October):
a) falling in value to less than $703.2, by 25-Sep-07, or
b) rising in value to more than $704.0 by 25-Sep-07
It is important to note that the Gold market, you trade in £X per point, where a point is $0.1 of Gold movement. eg if your stake was £40 per point and the Gold moves $0.5 then that would be a £200 difference to your profit / loss.
Financial Spread Bet on Gold
So let's say you see the live price on an online spread betting service like financialspreads.com. At the time of writing it's quoting a spread of $703.2 - $704.0.
1) Let's say you think that Gold will go above the $704 mark by 25-Sep-07 (the expiry date)
2) You decide to 'buy' the market and invest £20 per point
3) The value of the market increases. You let the spread bet run until the expiry date
4) The market expires at a final value of $705.1
5) You bought the market at $704.0
6) P&L = ((closing level - opening level) / per point) x stake
7) P&L = (($705.1 - $704.0) / 0.1) x $20 per point stake
8) P&L = (1.1 / 0.1) x £20 per point stake
9) Profit = £220
But what if the market did not work as expected? Perhaps the problems in the credit markets were short term and investor confidence returned. Perhaps the investors that originally looked risk averse would reinvest in equities rather than gold. If so, the Gold price could have gone against you and settled lower at $702.9. If that happened you would have made a loss on this spread bet
5) Buy price = $704.0
6) P&L = ((closing price - opening level) / per point) x stake
7) P&L = (($702.9 - $704.0) / 0.1) x £20 per point stake
8) P&L = (-1.1 / 0.1) x £20 per point stake
9) Loss = -£220
Where to spread bet on Gold:
You can currently spread bet on Gold and other commodities at:
FinancialSpreads.com
Capital Spreads
"Commodities Spread Bet - Spread Bet on Gold" written by RThomas, last updated 12-Sep-2007
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