Share Market

Stock Trading and commodity trading are two sides of the commercial trading. The former deals with corporeal items such as Gold, Silver, and Potatoes etc. whereas the latter deals with partial ownership of companies or stocks.

The values of stocks increases at a higher rate than commodities but can also decrease unlike value of commodities which increase at a much slower pace. Investment in commodities is hence safer. The price of a commodity rarely, if ever falls while as proven in the 2008 recession, price of stocks varies can drastically fall due to global economic conditions. Commodities are considered to be stores of wealth.

To illustrate this point, let us compare the growth of an ounce of Gold compared to a stock of Google from 2005 to 2010.

On Dec 1, 2005 the value of an ounce of Gold was around 500$, while the value of a share of Google was $405. On January 4, 2008, it was reported that Gold outpaced Google by 30% closing at $859.19 an ounce compared to Google’s $657. On January 24, 2008, the gold price broke the $900 mark per ounce for the first time. The price of gold topped $1,000 an ounce for the first time ever on March 13, 2008.

Thus the value of gold is stable as compared to stocks as commodities are not as prone to economic disasters as stocks which are directly impacted by them. However this steady increase is also slow and is not immune to inflation. Commodity market is going to be in a boom for many decades in the 21st century. The population has increased. The demand for commodities is at an all-time high while the supply is limited. So, opportunity lies everywhere whether it is stock or commodity.

To quote directly from the book “Basic Economics” by Thomas Sowell

A dollar invested in bonds in 1801 would be worth nearly a thousand dollars by 1998, a dollar invested in stocks that same year would be worth more than half a million dollars. All this is in real terms, taking inflation into account. Meanwhile, a dollar invested in gold in 1801 would by 1998 be worth just 78 cents.

At the end of the day, commodities are just two ways to invest money in and both have associated risks, advantages and disadvantages. It is better to personally analyze them and invest a certain amount in both to get security and returns both.