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Thread: i want to start buying commodities-- how would i start?

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    Default i want to start buying commodities-- how would i start?

    the thread title says it all. i'm not really sure where to dip my toes in and i'd like to start moving a portion of our investments towards this area.

    also i am interested in currency trading and where i can find some resources on getting started with that.

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    Default Re: i want to start buying commodities-- how would i start?

    Commodity trades, by some estimates, are in the ninety percentile losers. That and currency trading are the most sophisticated trading you can do. Realize you are up against the best, brightest, wired-in traders on Wall Street. In my opinion, if you buy currencies, and are willing to sit on those for a period of time that may turn out to be longer than you thought, is the way to go. My best advice is to talk to someone that does, or has done it for a living that has no vested interest whether you trade or not. That is what I have done.

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    Default Re: i want to start buying commodities-- how would i start?

    Actual trading of commodities themselves takes place on different exchanges, and makes use of a different broker network, than the exchanges used for trading stocks and bonds. Lately there ARE a few online commodity broker services becoming available, such as and .

    Be aware that when trading commodities themselves via the CME or COMEX or NYBOT, that you are talking about minimum trading blocks that are fairly expensive i.e. 100 ozs of gold (at $675 per oz) or 5000 ozs of silver (at $13 per oz). However when you are trading futures contracts on those commodities, there are now 'mini' sizes available. Also be aware that commodity trading requires the establishment of a margin account and the maintenance of margins - see - establishing a margin account requires that the person have both good credit and also some amount of up front cash.

    Because of the size increments involved in trading on the commodity exchanges, as well as the margin / credit requirements, getting into the commodities markets can be difficult for a 'small time' investor. Recognizing this problem, a number of financial institutions set out to create Exchange Traded Funds which trade on the 'regular' stock exchanges through 'regular' stock brokerage accounts, and at share prices which are 'affordable' to the small time investor. See

    GLD is a pure play on gold - SLV is a pure play on silver - USO is a pure play on oil - FXE is a pure play on the Euro ... which trade on the US stock exchanges.

    In addition to these 'large' US commodity ETF's there are also a ton of other ETF's trading on the London Stock Exchange which cover other commodities - see . These can also be traded through any US online stock brokerage account.

    As a 'small time' investor with limited experience, I would highly recommend getting your feet wet with the stock exchange traded commodity ETF's first using your regular stock brokerage account. I would then recommend that you get some experience trading futures contracts on those commodity ETF's first as well (well, at least for those ETF's that do trade futures). Then if you still want to make the leap to the 'big time', set up a margin account with a commodities broker. As you can see from the expense ratios of stock exchange based commodity based ETF's, the financial institutions are clipping you about 1/2% for the 'privelege' of easy trading in relatively small dollar increments, which would not be the case if you were actually trading commodities themselves instead of ETF's based on those commodities.

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    Default Re: i want to start buying commodities-- how would i start?

    wow, that is pretty handy to know. this is the sort of thing i was interested in, actually, in addition to purchasing gold directly various ways.

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    Default Re: i want to start buying commodities-- how would i start?

    Well, purchasing small quantities of physical gold is fairly easy these days ...

    I have used which only requires a credit card and a mouse click.

    Also if you are contemplating buying more than $5000 worth of precious metals at a time, offers a bit less markup than Kitco ... but also requires a bank wire transfer rather than a credit card.

    PS there is something to be said for actually having gold or silver bars / coins in your hand ! With the US commodity ETF's, and even more so with the London commodity ETF's, all you are actually buying is a piece of paper in which a company promises to pay you X$ depending on the future price action of commodity markets. If a financial armageddon were to ever happen, those pieces of paper are not the same thing as owning the real thing.

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