Latest Commodities News & Reports

silver prices coins

Silver Prices Continue Higher as Trump Inauguration Weighs on Dollar

Haven demand and unease about Donald Trump's economic policies drove silver prices higher on Monday, as investors entered into the safety of precious metals...
crude oil

Crude Oil Prices Extend Rally As Ministers Praise Output Cuts

Following a rally of more than 2% in Friday’s trade, crude oil prices extended their upward trend in Asian trade on Monday despite the...
crude oil

Crude Oil Prices Forecast January 23-27

Crude oil prices experienced volatility last week, keeping with the trend that has characterized price action since the beginning of the year. The contract...
gold

Gold Prices Weekly Forecast: US Uncertainty Will Underpin Prices

Political developments in Washington are liable to dominate trends in gold for the week ahead with choppy trading liable to be the most important...
natural gas

Mild Weather Weighs on Natural Gas Prices

Natural gas prices ended the week on a down note, with the contract for February settlement on the New York Mercantile Exchange closing today's...
oil rig

Oil Futures Hold onto Gains After Sharp Rise in Rig Count

Oil futures ended the week with a rally, as the contract for March delivery on the New York Mercantile Exchange closed at $53.24/barrel, up...
sugar prices

Sugar Prices Fractionally Higher After Thursday’s Technical Collapse

ICE raw sugar prices were fractionally higher on Friday, just one day after a technical sell-off resulted in a collapse of prices.On Thursday, ICE...
Gold

Gold Futures Start Off the Week Strong, End with a Whimper

Gold futures ended the holiday-shortened week with a dull session, as the dollar failed to carve out a clear direction on the inauguration day...
Copper

Copper Prices End the Week with a Gain

Copper prices started off the week with a sharp decline, with the contract for March 2017 settlement on the COMEX division of the New...
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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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