Analysis For Metal and Oil
Why is it that the analysis for oil, which has no known reserves, is ignored by so many investors? The simple answer is that they don’t know. They don’t have the slightest idea what’s really going on.
Gold and oil have nothing in common. They are dissimilar, in fact. However, there are some things that they do have in common. These include:
Demand – In the oil industry, demand is everything. If there is no demand, there can be no supply. Demand is important.
Recovery – Recovery is also vital to an investor’s strategy in the current economic environment. The longer the recovery period for a product or service, the better the returns will be. Sometimes, companies need to stop production to allow a recovery period to take place.
Assessment – As an analyst, one must provide a detailed assessment of all of the above. An investor must know how it all fits together. An analyst should always be aware of market trends, economic variables, supply and demand, economic and political factors, and financial results.
An analysis for metal and gold, however, is very different. Let’s look at some of the similarities and differences between the two.
As an investor, you must know when to enter or exit the metals market. This can be very different from investing in oil. In the oil market, you need to look out for short-term fluctuations in prices.
With metals, you don’t have to look out for short-term price movements. What you need to watch for is whether or not the commodity is valued correctly.
Value is all about calculating the risk-adjusted returns. This is exactly how the analysis for oil and metal values work. You need to look at the assets that are being sold, and then estimate the market value.
Another thing to keep in mind is that the metals market is a liquid market. It’s a very fast-moving market, but the return that can be made here is much more limited than in the oil market. You don’t want to put too much money into commodities trade if you don’t have to.
Finding the right asset is another differentiating factor. The metals market is full of options, but you need to be careful here. There are many “timing” options, and those are certainly not good options if you’re just getting started.
That brings us to the last major difference between analysis for metal and oil. The fundamental analysis for metals focuses more on the industry, while the fundamental analysis for oil is much more broad. There are many reasons for this, including the fact that many commodity markets have many players.