Commodities are raw materials or agricultural products that can be bought and sold, with examples being gold, silver, and coffee. From Copper to corn, coal to crude oil, commodities are central to the lives of billions of people around the world. We are all affected by their price fluctuations.
There are two traditional ways to trade commodities – buying and selling via exchanges, or trading them using derivatives such as binary options, CFDs and spread bets.
Virtuse Exchange leverages Digital Asset Collateralized Contracts (DACCs), a model that allows converting your cryptocurrencies into commodities, without having to move money from one wallet to another. The DACCs act rather like a stablecoin whose value can be pegged with a reliable price feed to the value of USD. You can buy and sell gold seamlessly and hold it on your private keys.
By trading volume, the top commodities include gold, silver, US Crude Oil, Brent Crude, copper, and Natural Gas. Products such as coffee, wheat, and sugar are also featured on the list of most traded commodities. Here are some of the major ones to consider:
Gold has cultural, industrial and financial value and has been the most highly desired of the world’s precious metals since ancient times. It was integral to valuation of the world’s currencies well into the 20th century, linked to the price of the US dollar until the early 1970s.
Silver, like gold, is often used as an investment, and the prices of the two metals have been known to move correspondingly. However, silver is far more in demand as an industrial asset than gold, so events in the technology sector have far more of an effect on its price. Silver trading strategies vary, but trend following and range trading tend to be the most popular.
Platinum is one of the world’s rarest metals with new mine production totaling only about 5 million troy ounces a year. It is chemically inert metallic element that is more valuable than gold. All the platinum mined to date would fit in the average-size living room. Platinum is mined all over the world with supplies concentrated in South Africa. South Africa accounts for nearly 80% of world supply, followed by Russia, and North America. The word “platinum” is derived from the Spanish word platina meaning silver.
Oil is the most popular commodity among traders. With a constant supply and demand, liquidity is rarely hard to find and volatility as almost as high as in bitcoin.
Coffee is one of the world’s most important cash commodities. Coffee is the common name for any type of tree in the genus madder family. It is actually a tropical evergreen shrub that has the potential to grow 100 feet tall. The coffee tree grows in tropical regions between the Tropics of Cancer and Capricorn in areas with abundant rainfall, year-round warm temperatures averaging about 70 degrees Fahrenheit, and no frost. It takes approximately 4,000 handpicked green coffee beans to make a pound of coffee.
The amount of CO2 in the atmosphere is increasing at an unprecedented pace. The rate of CO2 growth over the last decade is 100 to 200 times faster than what the Earth experienced during the transition from the last ice age. In order to mitigate the threats of man-made climate change, environmental, business and political leaders have developed and implemented various types of mechanisms. The most widely adopted and ultimately credited for most CO2 reductions are: carbon tax and cap-and-trade programs (ETS). The first one serves a good start and a carbon price floor in many countries, but it is also largely perceived by the market participants as a punishment. The latter is embraced more positively and serves as a reward for emissions reductions. In short, ETS is vastly superior to carbon tax, it creates competition between the emitters and triggers new investments and R&D.
Commodity trading can mean two things – buying and selling commodities via exchanges, or trading them via derivatives or cryptocurrencies.
Some commodities are more tradeable than others. For example, markets such as orange juice, oats, and feeder cattle are less liquid– such markets often prohibit speculators from entering or exiting a trade at the point they would like to. An example of a more tradeable commodity is crude oil, gold or coffee.
When trading commodities, speculators should consider factors such as the level of volatility associated with the trade, the aforementioned liquidity of the market, and other factors that influence price movements, listed below.
The commodities market is attractive to traders because it can offer:
Certain commodities, such as gold, can be a sensible investment in times of market turbulence. This is due to the likelihood of the asset retaining its value – or even increasing in price – during challenging economic conditions.
The dramatic swings in commodity prices mean that, with the right knowledge, traders can take advantage of price movements in liquid markets.
Broad exposure to commodities can be a good source of portfolio diversification, as they collectively show low correlations with equities and bonds.
DACCs and other contracts on a wide range of popular metals, energies, and softs
Use our risk management tools to manage your positions even in volatile times
Enjoy the best commodity spreads on the market with no insurance costs, including on gold and oil
Your profit/loss will be clearer over the position’s lifetime, with no need to close on expiry and open a new position
Take advantage of technical analysis, available as long as you want, and backdated price charts for the last three to five years
Enjoy buying as selling commodities seamlessly and hold them in your private wallet.
Commodities are also generally traded as futures contracts. These are simply agreements to trade an asset at an agreed price and date in the future. This enables you to trade the contracts themselves without ever having to own the underlying asset.
Commodities are traded on a number of exchanges that specialize in particular markets, including:
|Commodity||Open to close (ET)||Break time (ET)||Open to close (GMT)||Break time (GMT)|
|Gold||18:00-17:00 Sunday-Friday||17:00-18:00 Monday-Friday||23:00-22:00 Sunday-Friday||22:00-23:00 Monday-Friday|
|Silver||18:00-17:00 Sunday-Friday||17:00-18:00 Monday-Friday||23:00-22:00 Sunday-Friday||22:00-23:00 Monday-Friday|
|Oil – US Crude||18:00-17:00 Sunday-Friday||17:00-18:00 Monday-Friday||23:00-22:00 Sunday-Friday||22:00-23:00 Monday-Friday|
|Oil – Brent Crude||18:00-17:00 Sunday-Friday||17:00-18:00 Monday-Friday||23:00-22:00 Sunday-Friday||22:00-23:00 Monday-Friday|
|Copper||18:00-17:00 Sunday-Friday||17:00-18:00 Monday-Friday||23:00-22:00 Sunday-Friday||22:00-23:00 Monday-Friday|
|Natural Gas||18:00-17:00 Sunday-Friday||17:00-18:00 Monday-Friday||23:00-22:00 Sunday-Friday||22:00-23:00 Monday-Friday|