Gold, that precious yellow metal. A product that since time immemorial has served as currency and until relatively recently was the basis of the international monetary system in the West.
The monetary unit of a certain country was linked to the amount of gold it had in the reserves of its Central Bank.
The first bills that appeared were nothing more than checks to the bearer to exchange for gold in a Bank. The Banks maintained reserves to prop up the currency issued.
Risks of investment in raw materials
The raw materials require a very specialized and experienced management due to the technical complexities that present:
Many raw materials have very high volatilities , which can range between 20% and 80%. Therefore, the investment in this asset is aimed at investors who are willing to assume these variations in the price. Volatility, however, can be reduced by investing in commodities in a diversified way, and in this case it can be assimilated to the volatility of equities.
As we have previously understanding spot pricing commented, the value of the raw material depends on factors that are not always easy to predict, as is the case of meteorological events. That is why any projection with a long-term horizon is a difficult task to predict.
The results depend on the access vehicle , if we invest through derivatives, physical possession or through equity instruments, the results can be very different
Because the physical delivery of the raw material on which you want to have exposure is avoided, it is necessary to sell the contract that is going to expire and buy the next one (roll over). The return that the investor will obtain for this change will depend on the slope of the future prices: When the curves the investor does not collect the entire expected rise in the spot price of the raw material, which may disappoint him. The opposite happens when the curve is in backwardation.