Latest Commodities News & Reports

coal prices

Coal Prices: Prepare for Another Rally

Thermal coal prices could see another steep rally this fall and winter if China decides to increase checks on seaborne coal arrivals.According to Platts,...
gas storage

Natural Gas Prices Supported By Crude Oil Gains, Weather Conditions In Focus

Robust global factors helped support natural gas prices on Tuesday and expectations of more favourable weather conditions could provide a boost from late this...

Coffee Prices: Arabica Rebounds After Plunge to 16-Month Low

Arabica coffee prices are rebounding, with the most-active futures contract adding 1.2% on Monday even after traders bid futures up 5.6% last Friday. At...

Nickel Futures Edge Higher, Traders Eye Resumption of Mining in Phillipines

Nickel futures were trading with a slight, upside bias on Tuesday, following the entire base metals complex higher as traders took in stride the...
gold price bar

Gold Prices Stifled By Mixed Dollar Trend, Higher Yields Curb Support

The dollar overall posted significant losses on Tuesday, but the positive impact on gold was offset by an US advance against the yen and...
oil pipeline

WTI Oil Prices Continue To Correct Higher, Inventories Data Back On the Radar

Short covering and a weaker dollar have combined to maintain the rally in oil prices while the latest inventories data will be important in...
silver prices bullion

Silver Prices Edge Higher After Early-Week Volatility

Silver prices edged higher on Tuesday, as the market stabilized following a volatile start to the week.Silver for September settlement climbed 5 cents, or 0.3%,...
cargo ship baltic dry index

Baltic Dry Index Pushing Back Towards 900 Points

The Baltic Dry Index trekked higher again on Monday, this time adding 14 points to reach 884. This is the BDI’s highest value since...
uranium price

Uranium Prices: Russia Busy With Nuclear Energy Expansion, Technology Development

Russia's nuclear power ambitions lag behind other emerging economies, but its advancements in technology could provide a great contribution to the nuclear power sector...
crude oil
gold
silver
copper
natural gas
steel

Commodities are raw materials intended for use or consumption. There are three main commodity classifications: Agriculture commodities (often referred to as soft commodities), energy commodities, and metal commodities (referred to as hard commodities).

The most commonly traded commodities are crude oil, gold, silver, and copper.

How Are Commodities Traded?

Commodity markets can include physical delivery, referred to as a spot contract. Most trades, however, are carried out through derivative trading using futures, forwards, CFD’s, and options.

  • Futures contracts are carried out through regulated commodity exchanges. There are a number of international commodity exchanges; the world’s largest futures exchange is the Chicago Mercantile Exchange (CME). Other notable exchanges include the New York Mercantile Exchange, and the London Metal Exchange.

Futures contracts have been the most popular method of trading commodities. The introduction of CFD’s in the late 1990s popularized commodity trading as the usage of leverage was permitted.

  • CFD’s are now offered by most brokers, including brokers that focus primarily on currency trading. While the range of products offered on CFD trading varies from one broker to another, at a minimum, most will offer to trade in crude oil, gold, and silver.
  • Forward contracts introduce the element of time into the equation. The method has been commonly used in agricultural trading, to avoid fluctuations in price ahead of harvesting a crop. The forward contract would allow farmers to set the price on their crops in advance, eliminating risk as a result of price fluctuations. Trading on forward contracts has expanded outside of its original intended use, and contracts are now traded for speculative purposes in a broad range of commodities.

What are Commodities Correlated With?

As the US dollar is the largest traded currency in the world, there is a loose inverse correlation between the value of the dollar and commodity assets.

While the US dollar carries a correlation with the broader commodity market, individual currencies tend to have correlations with individual commodities. In the currency markets, resource-driven economies are referred to as commodity currencies. New Zealand, for example, relies heavily on their dairy trade exports, and therefore fluctuations in dairy prices stand to affect their economy, and as a result, stand to impact their currency. In Australia, copper exports have created a link between their currency and the commodity. Canada produces oil, and their currency carries a strong correlation with oil prices.

Metals have been defined as safe haven assets. During periods of market uncertainty, or what is commonly known as risk aversion, gold prices tend to go up. Risk sentiment shifts in the global financial markets are not the only influence on gold; the precious metal is also bought as a hedge during extended times of low inflation.

Factors That Affect Commodity Markets

In its most general form, supply and demand drive commodity markets. Individual commodity classifications and individual commodities are driven by different influences. Oil, for example, is sensitive to decisions made by the Organization of the Petroleum Exporting Countries (OPEC). Gold prices are influenced by risk sentiment and global inflation levels. The price of gold then influences other commodities under the metals umbrella.

Agricultural commodities are affected by seasonality patterns that can be related to weather conditions, which consequently affect supply. Global events and natural disasters can impact the commodity market, as an example, a hurricane in an agricultural-driven economy would simultaneously increase demand for gold while suppressing prices in agriculture commodities.

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