Subscribe NowJoin over 20,000 other Vintage Value investors today!

Everything You Need to Know About Commodity Trading

Everything You Need to Know About Commodity Trading

Trading commodities on the global market has become a popular method of investment, as many have widespread use across the world. This means you can trade in materials which are constantly shifting in value as global demand increases/diminishes. Therefore, the commodities market, which is commonly accessed online through brokers like Sucden Financial, is an exciting and ever moving entity. Here are some of the most popular trading commodities today.

Gold

Gold is easily one of the most traded commodities, as it has a reputation as a fairly safe bet when it comes to investments. In fact, is has become known as a safe haven asset because its core value rarely decreases, and as such neither does its market value.

One point of interest about gold is that it often performs extremely well in times of economic and global upsets/crises. Since such events are often in abundance, gold can often be seen rising in value, especially when currency plummets or the economic climate becomes uncertain. Many investors and traders will long to forget the previous historical shock behind Bre-X, where at a time of prospecting, the discovering of that so-called “gold”, was never to be found, driving the markets into crisis.

Crude Oil

This commodity is arguably one of the most used in existence, since it provides a source of fuel for countries worldwide. The price of crude oil is sensitive to global political events, since these can impact heavily on supply and demand.

In recent years, the price of oil has been dropping considerably compared to the highs of over $115 per barrel in 2014. The price is now fluctuating in the $40 per barrel region, and this huge drop has been largely attributed to oversupply. As a non-renewable energy source, however, prices could well rise again when reserves begin to run low, or drop if alternative energy sources become favoured.

Base Metals

Copper, zinc and lead are some of the most popular traded base metals, and like crude oil, these are common materials with a great many uses across the globe. Back in April, copper hit a three-month low due to geopolitical tensions, such as heightened animosity between the US and North Korea.

Aluminium and zinc also dropped in value by 0.9% and 3.8% respectively on the London Metal Exchange, showing just how sensitive these metals can be. Such drops can create good opportunities for investors to buy these commodities at lower prices, with a look to selling them on when the political waters settle.

Coffee

As one of the most consumed beverages globally, it is easy to see why coffee is a popular choice for traders. Robusta and Arabica are the two types of coffee bean which exist, and each is traded on different stock markets.

In 2004, a number of countries from Africa and South East Asia began to produce and sell coffee, which caused a drop in prices worldwide. Demand for each type of bean can also affect market prices, as each one falls in and out of fashion, and crop success rates naturally have an impact on the market value of coffee.

Sugar

Sugar is similar to coffee in its attributes as a resource, since it is a soft commodity which is affected by factors like the weather. Many consider it to be an undervalued commodity class, and as such it has become a popular option for investors.

Political instability in some of the countries which produce sugar is one factor which can affect its price on the market, as well as global demand. Since it is viewed as an unhealthy addition to food and drink products, it is uncertain how its value as a commodity will be affected in the future, especially with clampdowns like the UK sugar tax being introduced.

These are some of the many traded commodities which have proven to be incredibly popular. Each is unique in its properties and can be affected by a variety of factors, some of which more predictable than others.

Water

Yes, it’s true, you can invest in water. There are three ways you can do this: (1) buy water rights, (2) buy water-rich farm land, or (3) invest in water stocks or water ETFs. Check out How to Invest in Water Like Dr. Michael Burry from the Big Short and The 40 Best Water Stocks to Buy Right Now for more on how to invest in water.