Although it may feel that you are going round in circles, eventually, you’ll achieve financial stabilization, and you’ll be able to sigh with relief. What then? Perhaps if you no longer feel that you have to collect every penny, in case life decides to surprise you once more, you might consider doing something with it. What would be a good idea? Perhaps investing it somewhere, why not taking too many risks? In a second, you’ll learn what commodities are and which ones are the most traded worldwide. Let’s go!
What is a Commodity?
A commodity is a raw material that is either consumed or used to create some other goods. The examples of popular commodities are f.e. crude oil, coffee, and apples. Additionally, crude oil needs to be refined to be turned into a product that can be used. Commodities are often considered to be safe-bets during the times of financial trouble, as compared to other types of investments, their prices are more stable.
Is forex and commodity trading Similar?
Both forex and commodity trading attract people to invest their money because of the low prices of their shares. It doesn’t mean that they are exactly alike. Although there is much luck involved in commodity trading, there are multiple factors that can be taken into account when making predictions – consumer trends, weather, and government policies. When it comes to forex trading, it is more difficult to predict what will happen even in the near future, which means that investing in it is both riskier and potentially more rewarding. If you don’t know much about forex but are eager to try, you can check out Engine Forex to find the most suitable forex broker.
The most popular Commodities
Okay, so which commodities are the most popular? Let’s find out!
- Crude oil is the most popular commodity in the world, which is understandable, given the fact that it is the most important source of fuel and energy. It is also an essential element when it comes to the production of fertilizers, plastics and textiles. The price of crude oil correlates with the performance of the global economy. In the past, the Organisation of the Petroleum Exporting Countries, commonly known as OPEC, used to have a significant influence on the production of oil, but with time its power decreased.
- Steel is useful in many areas, including construction, infrastructure, and manufacturing. Similarly, its price is correlated with the state of the global economy. During the boom, when demand increases, its prices surge, while during the periods of stagnation, they fall.
- Soybeans contain a lot of protein and are easy to produce. They can be used to produce tofu, oil, and soy milk; they can also be consumed by animals. Because they are often used as substitutes for different products f.e. meat or dairy, they follow the price patterns of those products.
- Corn is another commodity that can be consumed by both humans and animals. It can be used to produce alcohol, corn syrup and animal feed.
- Although gold does not hold as much importance as in the past, it is still a widely popular commodity. The demand for gold in the industry is not high, but it is a particularly stable asset. That’s why the price of gold soars during times of economic turmoil.
- Silver is somewhat similar to gold – it is an asset, although less stable during the times of financial troubles. It is more commonly used than gold in the industry, which means that to a larger extent, its price is correlated with the state of the global economy.
- It is estimated that more than 2 billion cups of coffee are drunk every day. It comes as no surprise that it is of the most popular commodities in the world. The price of coffee fluctuates depending on weather conditions and the costs of transportation.
Commodity trading requires extensive knowledge, as there are multiple factors that can influence prices. You cannot predict every possible event that could reverse the trends, which means that to some extent, it is a game of luck. On the other hand, the unpredictability of the markets could also lead to more positive results.
Is it a good idea?
Trading commodities is a popular choice among people who want to try to make some money, but who would, at the same time, prefer not to take many risks. Is it possible to lose money while trading commodities? Absolutely, but given the fact that their prices are relatively resistant to sudden changes, they are a much safer option than other types of investments. If you think that you could put your knowledge about markets and geopolitics to use, then try your chances. Just be sure to start with investing small amounts, and increase this amount only after gaining some knowledge about trading.