Latest Commodities News & Reports

natural gas

Natural Gas Prices Edge Higher, Positioning Data In Focus

Natural gas prices will find it difficult to gain strong support in the short term, but any further paring of long positions would help...
crude oil

Baker Hughes US Oil Rig Count Increases To 758, WTI Oil Price Retreats

The total Baker Hughes North American rig count for the week ending June 20th increased to 941 from 933 the previous week.The number of...
uranium price

Uranium Prices: EIA Report Shows How US Uranium Industry is Dying

The U.S. was once the dominant global force in the uranium industry, but since the 1990s the country's involvement in the sector has been...
gold prices

Gold Prices Edge Higher On Equity Doubts, Mixed Influences Maintain Narrow Ranges

Asset classes overall have struggled for direction over the past 24 hours which has limited price moves in gold, although uncertainty surrounding equity markets...
cargo ship baltic dry index

Baltic Dry Index Turns Higher Following Surprising Boost to Capesize Rates

The Baltic Dry Index turned higher Friday, led by an unexpected rebound in physical and paper capesizes rates.Friday’s session started off as expected, with...

Coffee Prices: Arabica Rebounds Off of 16-Month Low

Arabica coffee prices were rebounding a bit Friday, regrouping from the prior session’s steep fall which saw futures plunge to their lowest price point...
oil storage tanks

Crude Oil Prices Remain In Correction Mode, Sentiment Remains Bleak

Oil prices have continued to correct higher, although gains have been limited by underlying negative sentiment with fears that price gains will erode quickly.WTI...
silver

Silver Prices Poised for First Weekly Gain in Three

Silver advanced for a second straight session Friday and was on track to break a two-week skid, as momentum return to precious metals amid...

Potash Prices: Will Marketing Cooperatives Rebalance the Market?

Potash prices have slumped, with the catalyst behind the recent weakness being the break apart of Belarusian Potash Company (BPC), a joint trading venture...
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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