Trading commodities is buying and selling products that are sold for consumption. This can include anything from sweet potatoes and beans to steel to coffee beans. It takes many sectors into account, including agricultural products and industrial. Mining, such as platinum, gold and silver, make up an important part of the commodity market. These metals that are difficult to extract can be available in limited quantities, which ups the prices. There are many events that can affect he prices of commodities, and usually there is no way of knowing ahead of time. This can be natural disasters that ruin crops or destroy factories, strikes by union affiliated workers, such as miners, truckers or other types of transportation. There can be financial publications of economic overturns or new taxes and trade regulations. On top of all that, if there are wars or regional conflicts in any part of the world, it can influence specific commodities. Even though there are many things that can go wrong when trading commodities, understanding them will help traders profit even in economically difficult times.
Trading Commodity Groups
The metals group makes up what is sometimes called hard commodities. They include both semi-precious metals and precious metals that need to be mined. Gold and silver can be traded like currency whereas one group of non-precious metals are traded for use in development or consumption. Some of the metals traded include platinum, gold, palladium, copper and silver.
The metals group is the largest commodity group followed by energy. The entire world’s economy revolves around energy prices. These commodities are natural gas, crude oil and oil. They are so important that supplies can actually cause conflicts between nations and governments. Besides buying and selling energy products for industry and development, they are important to transportation and farming. Think what could happen if no one had gas to drive to work, there wasn’t enough fuel to run airlines or for trucking fruits and vegetables across the country. The domino from lack of energy due to high prices would be quick and severe, affecting every area of the economy.
The soft commodities are the agricultural products. They are either consumed by people, animals or used up in industry as raw materials. This is a market that is the most sensitive to natural disasters, climate change and the variances in supply and demand. Sometimes fluctuating supply and demand can be predicted, but more than often, it cannot be. If a sudden storm wipes out half the country’s soybeans, that is going to be felt around the world. Some of the busiest commodities are wheat, soybeans, coffee, sugar, coacoa, orange juice, cotton and corn.
Commodity Market Exchanges
To trade in commodities, you would hook into the gobal exchanges around the world. They help regulate prices and keep track of supply and demand. A few of these exchanges are the Chicago Board of Trade, Dubai Mercantile Exchange, London Metal Exchange and the Australian Securities Exchange. You can find trading opportunities on the exchange or through a broker.
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