As the most abundant precious metal found in the Earth's crust, Platinum also commands a high demand, thereby also making this commodity a much-desired investment.
Despite not having the same allure of Gold and Silver, Aluminum serves as a good hedge to combat inflation and deflation. With its high demand connected to construction, industrial and housing industries, the price of Aluminum highly depends on the trends of these sectors, which makes its price movements easier to keep track as compared to other precious metals.
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History of Aluminum
The use of Aluminum originates to the usage of "Alum" dating back to the 5th Century BCE when ancient civilizations used alum as a dyeing mordant. In 1722, a German chemist Friedrich Hoffman theorized that the "base of alum was a distinct Earth". Since then attempts to synthesized alum were made until a successful breakthrough to produce aluminum through alum was achieved by Danish chemist Hans Christian Orsted in 1824.
In 1886, the first large-scale production of aluminum for industrial use was developed by French engineer Paul Heroult and Charles Martin Hall, an American engineer—which became known as the Hall-Heroult Process.
Since then, aluminum became a major component for everyday items such as optical instruments, jewelries, tableware. Aluminum garnered higher demand during World War I and once again during World War II as advances in aviation technology ensued.
By mid-20th century, the use of aluminum rose rapidly from 6.800 metric tons annually to 10,000 tons in 1971 to 50,000 metric tons in 2013. Other than the everyday consumer household or grocery items such as soda cans, the production of aluminum relies heavily on the automobile, electrical, construction and aerospace industries.
What Drives the Price of Aluminum?
Other than the demands of aluminum from the leading industries that rely heavily on it such as the aerospace, consumer good, electrical, transportation and infrastructure, other factors that influences the price of aluminum includes: Input costs, the value of the US Dollar and the Chinese demand.
Why the Chinese Demand?
China uses almost 40% of the world supply of aluminum thereby making it the biggest driver of aluminum price among all countries in the world.
Ways to Invest in Aluminum
For investors eyeing to invest in Aluminum, here are a few ways to do it.
- Aluminum ETFs: Many investors go this route when investing on Aluminum. For ETFs starters, ETFs are marketable securities that keep track of a commodity or an index, a bunch of assets such as index fund and a bond. ETFs are traded on stock exchanges and accessible to social trading platforms such as eToro.
- Aluminum Futures: This is another option to invest on Aluminum. A "futures contract" is an agreement to buy or sell a specific commodity at a predetermined value on a specified date in the future. Futures Contract are held at stock exchanges which mediates and facilitates both the buying and selling parties. Because everything is predetermined, investors are shielded from adverse value fluctuations when engaging in Futures Contracts.
One popular futures that trades Aluminum is the CME Group (CME: NASDAQ). This American futures company offers a "physical aluminum futures contract". Another is the London Metal Exchange which acts as a trading platform for both options and futures that includes an aluminum futures contract. Other choices include the Shanghai Futures Exchange, and the New York Mercantile Exchange (COMEX).
Another emerging option is the iPath Series B Bloomberg Aluminum Subindex Total Return ETN (JJU: Arca), which is an exchange-traded platform delivering yields through a futures contract-based investment strategy.
- Aluminum Stocks: This route involves investing directly to companies that are heavily involved with the production of aluminum. Some of the largest companies involved in aluminum production are: The Aluminum Corporation of China (Chalco), Alcoa (AA: NYSE), Rio Tinto (RIO: NYSE), Alumina, South32, Billiton, Century Aluminum and Norsk Hydro just to name a few.
Largest Producing Aluminum Countries
China, Russia, The United States of America, UAE and Canada are the biggest producers of Aluminum in the world.
Trading Aluminum via CFDs
Many investors are trading via Contracts for Difference (CFD) and by using this method to trade Aluminum, investors can speculate on the value of aluminum without needing to own a physical aluminum.
How to Start Trading of Aluminum?
There are several ways of engaging in CFD trading of aluminum. All you need to do is find a reliable broker or CFD trading platform such as eToro to open an account and deposit your fund.
Trading aluminum in eToro's CFD trading platform doesn't require any storage fees since you won't be trading any physical commodities.
How to Trade Aluminum on eToro?
- Create an account on eToro / Log-in your account for existing users.
- Click "Discover".
- Select "Commodities".
- Choose “ALUMINUM”.
- Select BUY or SELL.
- Key in your desired amount to invest or the number of aluminum units you want to trade.
- Review and set the stop loss, leverage, and take profit parameters.
- Select “Open Trade”.
Ready to trade aluminum with eToro?
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Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
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