Latest Commodities News & Reports

Gold

Gold Futures Ease Back from Recent Highs

Gold futures traded lower in today's session as the dollar posted modest gains. The contract for February 2017 settlement on the COMEX division of...
sugar prices

Sugar Price Movement Dictated by Technicals

Sugar trade has been volatile over recent weeks, with sugar prices swinging between gains and losses with technical trading dominating the commodity’s movement.Last...
gold

Gold Prices Drift Lower, Unable To Break Resistance

Gold drew some support from a weaker dollar and lower bond yields, but it was unable to break key resistance levels and drifted weaker...
silver prices bullion

Silver Prices Steady Amid Political Uncertainty

Silver prices edged slightly lower on Tuesday, but remained in a five-week uptrend amid political uncertainty surrounding President Trump and Brexit.March silver futures slipped...
oil rig

Crude Oil Prices Extend Their Unpredictability Despite Higher Production Cuts

Crude oil prices continued their volatility in FY2017 despite a production cut deal between 24 countries. After a short rally that was supported by...

Coffee Prices Supported by Reduced Production Expectations

Coffee prices remained supported amid the kick-off of a new week of trading, with upside interest extending from reduced expectations for Brazil’s 2017 coffee...
crude oil

Crude Oil Futures Test Upper Boundary of Price Pattern and Fail

Crude oil futures ended lower today, with the contract for March delivery on the New York Mercantile Exchange, which is now the front month...
Natural Gas

Natural Gas Prices Rebound in Today’s Trading

Natural gas prices rebounded today, with the contract for February settlement on the New York Mercantile Exchange closing today's pit session $0.04 higher, up...
Gold

Gold Futures Move Higher as Dollar Declines

Gold futures ended up on the day, with the contract for February 2017 settlement on the COMEX division of the New York Mercantile Exchange...
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.

1,696FansLike
9,753FollowersFollow
985FollowersFollow

More News