Octa research: commodity performers in 2023

Octa research: commodity performers in 2023

New Delhi [India]: Commodity trading offers investors lucrative trading opportunities. In 2023, some commodity asset categories have shown double-digit returns, and some will do the opposite. Octa, in the article, talks about commodity performers in 2023.

Trading commodities is a promising opportunity for those looking to diversify risks, protect themselves against inflation and make money using predictable price movements within a year. So, it will be interesting to find out which commodities perform best and which perform worst. But first, let’s try to understand commodities as an asset.

What are Commodities?

Commodities are the raw materials used to create consumer products, from food to furniture to petrol. Commodities include agricultural products such as wheat and cattle, energy products such as oil and natural gas, and metals such as gold, silver and aluminium. There are also soft commodities that cannot be stored for long periods, such as sugar, cotton, cocoa, and coffee.

Why do traders use commodities to generate income?

Predictability: As commodities are real assets, they tend to react to changes in external factors differently than stocks, bonds, and currencies, which are financial assets. In particular, no central bank regulator sets the rules of the game for tangible assets. Here, the law of supply and demand determines the price–a shortage of a particular commodity naturally raises its price.

Inflation defence: Changes in the prices of the main categories of commodities are the first turn of the inflationary spiral. The more significant the increase in commodity prices, the greater the increase in goods and services production costs (Producer Price Index–PPI). The growth of production costs of goods and services provokes the growth of retail prices, thus shifting the inflationary burden to the consumers (Consumer Price Index–CPI). Therefore, commodity investments can provide portfolios with inflation protection.

Cyclicality: Demand for groups of goods depends on the time of year. For example, the demand for feed grain grows twice a year–during the preparation for sowing and harvest period. Also, there is an assertion that petrol prices rise in summer when the holiday season starts. However, there is a downside–commodities may underperform during cyclical downturns in the global economy when consumer and industrial demand slows down.

Best & worst commodity performers

Almost all commodities ended in 2023 in negative territory: only gold took the crown, other metals showed negative dynamics, and most energy and agriculture commodities declined.

Gold is the leading precious metal. Copper is the best non-precious metal

Gold rose 13.10 per cent to a record high of $2,135. The rise in gold was driven by central bank purchases, which estimated 800 tonnes of gold in the first three quarters of 2023. As rate cuts in 2024 look more likely, investors are looking for a safe-haven gold asset, and the weaker dollar has accelerated this process.

Copper’s rise is driven by current demand, as it is virtually indispensable in most electronic devices, from mobile phones to solar panels.

Meanwhile, the very same factor makes palladium just as unpopular in 2023. Its main uses are catalytic converters and the automotive industry, and car sales have been declining as people keep switching to electric cars.

Lithium and nickel rank last. It’s all about the fact that their supply was extremely high in 2023. In fact, some major producers even halted production amid falling prices last year. The situation is unlikely to improve in 2024.

Energies were on a cyclical correction

Crude oil fell by almost 11 per cent due to rising aggregate supply: at the end of 2023, daily U.S. crude oil production stood at a record 13.3 million barrels per day. In addition, economic activity in China, the leading consumer of crude oil, hurt aggregate demand.

What’s on track now?

  • In 2024, moderate consumer activity weakens demand for commodities. The expected interest rate cuts by the U.S. Federal Reserve may not only be good for consumer activity–a weaker dollar will support the price of gold, which may rise even higher.
  • Lower inflation will continue to hold down the price of oil in 2024. However, if geopolitical tensions rise, the scenario could be reversed.
  • Commodities used in the green energy transition, such as nickel, copper, lithium and zinc, are trending downwards due to continued significant oversupply. Copper, lithium and zinc will also be in surplus in 2024.

Regardless of how 2024 turns out, it is clear that the commodities market offers traders a unique opportunity to make money. Octa allows its clients to trade gold–the most growing commodity, and other types of assets.

Forex swap: what it is, how it is calculated, and what are swap-free accounts in Octa

Forex swap: what it is, how it is calculated, and what are swap-free accounts in Octa

One of the most misunderstood terms in Forex trading is swap or Forex swap. To trade successfully, you should understand what Forex swap depends on and how it is calculated. This article describes what a Forex swap is, explains its mechanics, and describes swap-free trading accounts.

What is a Forex swap?

Swap is a commission charged for carrying open positions overnight to the next trading day in the Forex market. The exact moment when the swap is withdrawn from your trading account depends on your broker. Most brokers charge it most often between 11 p.m. and 12 a.m. server time.

The Forex market is over-the-counter and non-deliverable, meaning you are not the owner of the trading asset. In order not to cause the need for calculations, the system automatically closes an open position on the current trading day and opens it on the next one. Such closing is considered conditional, as the position is carried over, and the swap is charged.

Depending on the value of the swap and the position, the swap can be negative or positive. In other words, you will either have to pay a commission or be paid a commission for holding an open position overnight. This is because the margin system used in Forex trading allows you to use the additional capital the broker provides. You borrow funds to open a position from your broker.

There is an opinion among traders that the Forex swap is nothing but a broker’s commission. However, this is not true. Let’s find out how swaps work in the Forex market.

How do swaps work in the Forex market?

Every time you open a position, you make two transactions: buying one and selling another currency in a currency pair. So, you are essentially borrowing that money to sell one of the currencies and need to pay interest on the borrowed amount. However, in doing so, the currency you buy will earn you interest.

If the base interest rate on the currency you buy is higher than the currency you sell, you can earn interest on the difference in rates for carrying an open position to the next day. However, given the broker’s markup, regardless of the direction of the open position (buying or selling), you will have to pay a commission.

Thus, the value of a swap depends on the market and the instrument you are trading. For example, the swap on the same EURUSD and USDJPY positions will differ.

The value of swap varies depending on:

– online broker

– type of the position–Buy or Sell

– type of the asset

– number of days the position remains open

– nominal value of the position (number of lots).

Why is there a triple swap?

Sometimes, a swap is charged for holding an open position over the weekend, even if you did not have it on Saturday and Sunday. Such a fee is called a triple swap. Since the markets are closed on weekends, the triple swap was invented to compensate for this and is charged either on Fridays or Wednesdays, depending on the specific market.

This is because orders are settled on the Forex market on the second working day from the trade date (T+2). Since the value date falls on a weekend, the transfer is made for three days at once (on Monday). Therefore, from Wednesday to Thursday (at 12 a.m.), the swap is charged for the past weekend and Wednesday.

In other words, if you hold your position overnight when the triple swap is applied, your order will be charged three times the standard swap.

Are there swap-free accounts?

To make trading more convenient and accessible, many brokers have introduced the concept of swap-free accounts.

Swap-free accounts relieve the trader from the need to constantly monitor the size of accounting rates on currencies in a currency pair, make trading more straightforward, and allow taking into account in advance the commission for the transfer of positions when calculating the financial result of planned transactions. It is also relevant for those clients who cannot use swaps due to religious beliefs. This determines the second name of this type of account–Islamic accounts.

Charged daily, the swap fee accumulates over time, making trading less favourable. To enhance the investment opportunities of its customers, Octa has decided to remove swap fees for all types of trading accounts. These fees will no longer prevent traders from using medium- and long-term strategies in the financial market. Now, they can keep that position open for as long as they see fit and with no swap cost.

Octa’s 2023 in projects that made a difference: reflecting on CSR efforts of the year

Octa’s 2023 in projects that made a difference: reflecting on CSR efforts of the year

The year 2023 was not only about finance for the international broker Octa. Here’s how it helped make a difference through a series of CSR initiatives around the world.

In 2023, Octa significantly enhanced its corporate social responsibility (CSR) activities by carrying out 21 projects that left a lasting impact on local communities worldwide. These projects were designed to address emergency response needs and enhance educational opportunities for underprivileged students. In total, Octa reached out to over 5,700 individuals, making meaningful changes in their lives.

Recognising the importance of education in shaping the future, Octa dedicated a significant part of its CSR efforts to improving educational opportunities for underprivileged students, directly benefiting 100 educational institutions and over 3,300 students. Below are some of the projects Octa carried out in 2023.

In India, Octa helped equip Sita Rajaram Public School and Sita Rajaram Polytechnic College in Tamil Nadu, India, with two interactive panels. This initiative aimed to enhance the quality of education and provide students with an innovative learning experience.

In Malaysia, the broker helped to supply educational centres across Malaysia with complex IT resources and sponsored the Cambridge IGCSE curriculum exam fees for Malaysian students under the guardianship of the educational organisation Ideas Academy.

In Indonesia, Octa supported the humanitarian organisation Yayasan Tunas Aksara (YTA) in training four schools and ten teachers to manage and organise book libraries.

In Nigeria, Chess in Slums Africa (CISA), in collaboration with Octa, organised a Children’s Day celebration for 150 children from marginalised communities and three public schools. The children, aged 5 to 18, had an opportunity to interact and enhance their reasoning skills while playing chess.

In Mexico, Octa joined forces with the charitable organisation Pauta to create two science workshops for 300 girls, boys, and adolescents from different schools.

‘At Octa, we recognise that education is a driving force behind a thriving society. Our commitment to educational projects stems from the belief that knowledge is the most powerful tool to shape a brighter future. By investing in scholarships, learning materials, teacher training, and infrastructure development, we not only empower individual students but also contribute to the overall development of local communities,’ commented the Octa press office.

Emergency response initiatives

Dedicated to the well-being of local communities, Octa assisted more than 2,400 individuals affected by natural disasters in Indonesia, Malaysia, and Nigeria. This support included essential supplies such as food and daily necessities, as well as contributing to long-term recovery plans, which ensured that affected people could fully rebuild their lives in the aftermath of severe storms, floods, and earthquakes.

In Indonesia, Octa provided emergency help for the victims of the devastating effects of flooding, landslides, and erosion in Banjar Pebuahan, Jembrana, in Bali on 6 – 7 July 2023.

In Malaysia, Octa provided emergency aid in the state of Kelantan, Malaysia, where over 17,000 people had to be evacuated because of the intense flooding.

In Nigeria, the broker provided emergency support after a severe flood that resulted in over 600 deaths, 2,400 injuries, and the displacement of 1.4 million people. Octa helped renovate and equip Anam New City School’s flood-damaged classrooms, provided 42 small businesses with financial support to either revive or restart their operations, and donated farming supplies, including Yam and Cassava, to 65 local farmers.

‘As a company, we believe in the profound importance of emergency response projects and are committed to making a positive difference in the communities where we operate. In 2023, we helped hundreds of families that experienced devastating environmental conditions. From extreme storms in Bali to flooding in Kelantan, Malaysia, we were there with the people we serve, providing not only immediate relief but also long-term recovery help,’ the Octa press office commented.

About Octa

Octa is an international broker that has been providing online trading services worldwide since 2011. The company is involved in a comprehensive network of charity and humanitarian initiatives, including the improvement of educational infrastructure and short-notice relief projects supporting local communities.