Commodities, English as Commodities, generally refer to raw materials that can be used for financial transactions, including various raw materials in agriculture, animal husbandry, energy and metal fields. For example, gold, silver, oil, natural gas, corn, wheat, soybeans, timber, etc. are all commodities. Commodity trading is a type of financial management product that takes the prices of some major raw materials in the industrial and agricultural fields as investment objects and conducts investment transactions through stocks, funds, futures contracts or ETFs, etc., to help investors invest in commodities without holding physical objects. Commodity trading can enrich investment portfolios for investors, play a role in hedging risks in some investment fields, and can play a certain asset protection role in an inflationary environment. Therefore, it is favored by many investors. So what are the commodities? How can you invest in commodities? The difference from other commodities is that bulk commodities are usually basic raw materials for various industries and have stable market demand. Therefore, the price trend of bulk commodities has a certain degree of judgment. Therefore, in the field of investment, a variety of financial products have been developed to invest in the prices of these commodities, including stocks, futures, funds, ETFs, etc. When the prices of commodities are used to make financial investments, it is called "commodity trading". Commodity Trading in English refers to financial investments in a variety of commodities including stocks, futures, funds and ETFs. There may be several advantages to trading commodities: There are many types of commodities and involve many fields. The causes of commodity price fluctuations may involve wider economic conditions and have low correlation with stocks, bonds, etc. Therefore, when conducting comprehensive commodity transactions, investment risks can be effectively diversified; In addition to diversifying risks, commodity trading can also play a certain role in hedging risks. For example, if an investor invests in an airline, usually the airline's stock will fall due to the rise in oil prices. If oil or energy-related commodity trading is conducted during the same period, the risk of stock investment losses caused by rising oil prices can be effectively hedged; The price of commodities usually fluctuates with the development of inflation, so in an inflationary environment, commodity trading can reduce the adverse effects of inflation. What are the commodities? Commodities as a whole can be divided into soft commodities and hard commodities. Soft commodities refer to agriculture, animal husbandry and other categories, and hard commodities refer to the energy field and metal field. Futures trading of these commodities are traded on important exchanges in the world, including: futures exchange code Futures exchange name CBOT Chicago Board of Trade Chicago Board of Trade CME Chicago Mercantile Exchange Chicago Mercantile Exchange ICE Intercontinental Exchange Intercontinental Exchange NYME New York Mercantile Exchange nymex Chicago Mercantile Exchange DCE Dalian Commodity Exchange Dalian Commodity Exchange ZCE Zhengzhou Commodity Exchange Zhengzhou Commodity Exchange EURONEXT European New Exchange Technology SGX Europe OSE Osaka Exchange Osaka Exchange LME London Metal Exchange london metal exchange energy commodities Major commodity exchange trading codes WTI Crude Oil WTI crude oil NYMEX, ICE CL (NYMEX), WTI (ICE) Brent Crude Brent crude oil Ethanol ethanol AC (Open Auction) ZE (Electronic) Natural gas
natural gas NYMEX NG NBP Heating Oil heating oil HO Gulf Coast Gasoline gulf coast gasoline LR RBOB Gasoline/RBOB gasoline Use new formulations of gasoline blending materials RB Propane propane PN Purified Terephthalic Acid (PTA) Purified terephthalic acid TA Data source 2. Metal commodities industrial metal Industrial metals refer to metal raw materials mainly used in the industrial field. Major commodity exchanges Copper LeadLead Zinc Tin tin Aluminum Aluminum Alloy Aluminum alloy Nickel Cobalt Molybdenum precious metals Precious metals refer to metal raw materials that are mainly used for collection and preservation or are extremely rare. commodities major exchanges transaction code Gold gold COMEX GC Platinum Platinum PL Palladium Palladium PA Silver silver SI 3. Agricultural commodities farming Corn corn C/ZC (Electronic) Corn corn EMA Oats oats O/ZO (Electronic) Rough Rice brown rice ZR Soybeans soybeans S/ZS (Electronic) No 2. Soybean/No. 2 soybean genetically modified soybeans Rapeseed rapeseed ECO Soybean Meal SM/ZM (Electronic) Soy Meal Soybean Oil Soybean Oil BO/ZL (Electronic) Wheat wheat W/ZW (Electronic) EBL Milk milk DC Cocoa cocoa CC Coffee C coffee KC Cotton No.2 No. 2 cotton CT Sugar No.11 No. 11 sugar (raw sucrose) SB Sugar No.14 No. 14 sugar (original centrifuged sucrose) SE Frozen Concentrated Orange Juice Frozen orange juice concentrate FCOJ-A Adzuki bean 小豆 Robusta coffee robusta coffee animal husbandry Lean Hogs HE Live Cattle Live Cattle LE Feeder Cattle GF Forestry Random Length Lumber Random Length Lumber LBS Hardwood Pulphardwood pulp HWP Softwood Pulp softwood will WP What are some ways to invest in commodities? When commodities are introduced into the field of financial investment, investments can be made mainly through commodity stocks, commodity ETFs, commodity mutual funds, and commodity futures contracts. Buy bulk commodities directly The most original way to invest in commodities is to make physical investment in commodities, that is, to purchase commodities, such as gold bars, gold coins, etc., directly from dealers, keep them properly, and then sell them to the dealer when the price is deemed appropriate. Advantages: There are no third-party middlemen, and all proceeds from the investment process belong to investors. Disadvantages: Sufficient space needs to be provided for proper storage of bulk commodities; Transportation costs, etc. also need to be considered during the transaction process. 2. Commodity futures contracts Commodity futures contracts (Future Contracts) are the most important type of commodity trading. They originally originated from the expectations of future prices by commodity operators. They sign future trading contracts with fixed amounts with buyers, and when the products are delivered on the future expiration date, they can obtain price difference benefits or suffer price difference losses.
Commodity futures contracts are mainly traded on commodity exchanges. The two largest futures exchanges in the United States are the Chicago Mercantile Exchange and the New York Mercantile Exchange. After entering the futures market, investors begin to buy and sell commodity futures contracts. Generally speaking, the trading model is similar to ordinary futures trading, but the difference from ordinary futures trading is that the influencing factors of risks are broader and more generous. There are a variety of commodity futures contracts for trading in the market Commodity futures trading remains the riskiest trading method among various commodities. 3. Commodity stocks Commodity stock investment is the most direct investment method. Investors can choose a company engaged in a certain commodity to invest. For example, investors interested in the metal field can buy stocks of companies engaged in platinum mining. Investment method is simple A wider range of choices Profit and loss risks are more focused on the company's operating capabilities, and the dominant role of commodity prices in investment profits and losses is reduced. 4. Commodity ETFs Commodity ETFs are exchange-traded funds that collect multiple commodity stocks, funds or futures. They can be bought and sold flexibly like stocks, and their prices also change throughout the trading day. They are suitable for investors who want flexible trading and in which commodity prices dominate trading profits and losses. Flexible trading methods; Commodity prices play a more dominant role in investment trading profits and losses than in commodity stock trading. Currently, the number and types of ETF products targeting commodities on the market are limited. If you want to invest in specific categories of commodities, you may need to look for commodity trading products in other investment methods. 5. Commodity Mutual Funds Commodity mutual funds provide investors with more investment options. Fund managers will use their own judgment to select different products from different commodities, commodity material trading, commodity stock investment, and commodity futures contracts to combine to establish a commodity mutual fund. Therefore, investors can make more types of investments with less investment funds, and while diversifying investment risks, they can also be exposed to a variety of commodity transactions. Commodity mutual funds include a wider variety of investment products; Investment profits may decrease as risks decrease, and investors who want to make high-risk, high-return investments need to look for other investment products. What are commodity ETFs? Commodity ETFs are a simple way to plan target commodity transactions into a personal investment portfolio, allowing for more comprehensive investments in commodity types and trading types without holding actual commodities. Commodity ETFs mainly include commodity stocks, commodity futures, commodity price indexes and other financial products and derivatives. In a commodity ETF, depending on the decision of the fund manager, it may include multiple financial investment products for a certain type of commodity, or multiple financial investment products for multiple types of commodities, such as iShares S&P GSCI. This ETF includes futures contracts involving agriculture, animal husbandry, and industrial metals. Investors can decide which commodity ETF to buy based on their actual investment goals, investment habits, etc. The most popular commodity ETFs currently on the market are ETF products in the field of precious metals, such as gold ETF: SPDR Gold Shares and silver ETF: iShares Silver Trust, etc. Another area of concern is ETF products in the energy field. Unlike precious metals, because commodities in the energy field, such as oil or natural gas, cannot be stored for long periods of time like precious metals, the proportion of futures contracts in energy commodity ETF products will be relatively larger. Currently, the most well-known energy ETF is the SPDR S&P Oil & Gas Exploration and Production ETF, which has a diversified investment portfolio composed of 56 oil or natural gas companies. Advantages of Commodity ETFs
The trading of commodity ETFs is more flexible than futures and funds. It can be traded flexibly like stocks, and the price of commodity ETFs will continue to change every trading day, so it is very suitable for investors who make short-term investments; Another advantage of investing in commodity ETFs is that no capital gains tax will be incurred before the ETF is sold, so it has a tax advantage compared to other investment products, such as mutual funds. This is one of the reasons why most investors choose commodity ETF trading. What commodity ETFs are currently on the market? In addition to being traded in the stock market, commodity ETFs currently on the market can also be opened for investment in some asset management institutions. The following is a list of asset management institutions that currently issue commodity ETFs, as well as a list of major commodity ETFs currently on the market. Financial institutions that issue commodity ETFs Organization name Fund management scale (Billion Dollars) average rate Blackrock Financial Management 6.76 0.50% Invesco 13.31 0.75% First Trust 4.84 0.95% ProShares 0.01 0.76% WisdomTree 0.36 0.55% Rafferty Asset Management 0.42 0.72% CICC 1.48 0.79% Abrdn Plc 1.45 0.31% ETFMG 0.06 3.76% Concierge Technologies 1.03% The Hartford 0.89% Barclays Capital 1.39 0.73% GraniteShares 0.40 0.25% UBS 0.23 0.53% Credit Suisse Group AG 0.30 0.85% Government of Sweden 0.16 Wainwright, Inc. 0.69% ORIX Corp. 0.04 0.68% Commodity ETFs ETF code ETF full name total assets average trading volume FUT ProShares Managed Futures Strategy ETF $8,142.03 3,597.0 SDCI USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund $10,086.80 13,708.0 KCCA KraneShares California Carbon Allowance Strategy ETF $28,110.70 55,790.0 CCRV iShares Commodity Curve Carry Strategy ETF $40,671.70 10,090.0 BCIM abrdn Bloomberg Industrial Metals Strategy K-1 Free ETF $40,957.10 12,410.0 HGER Harbor All-Weather Inflation Focus ETF $43,650.00 N/A GSP iPath S&P GSCI Total Return Index ETN $44,601.00 40,554.0 BCM iPath Pure Beta Broad Commodity ETN $57,443.70 12,941.0 BDRY Breakwave Dry Bulk Shipping ETF
$59,496.90 278,113.0 HCOM Hartford Schroders Commodity Strategy ETF $60,977.10 19,322.0 UCIB ETRACS CMCI Total Return ETN Series B $73,879.70 7,068.0 GRN iPath Series B Carbon ETN $86,554.40 95,060.0 KEUA KraneShares European Carbon Allowance Strategy ETF $132,271.00 37,808.0 RJI Elements Rogers International Commodity Index-Total Return ETN $157,011.00 156,822.0 DJCB ETRACS Bloomberg Commodity Index Total Return ETN Series B $159,607.00 4,014.0 FAAR First Trust Alternative Absolute Return Strategy ETF $171,602.00 37,041.0 BCD abrdn Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF $287,380.00 144,198.0 USOI Credit Suisse X-Links Crude Oil Shares Covered Call ETN $304,918.00 1,348,349.0 GCC WisdomTree Enhanced Commodity Strategy Fund $358,500.00 171,792.0 USCI United States Commodity Index Fund $361,485.00 90,179.0 CMDY iShares Bloomberg Roll Select Commodity Strategy ETF $387,172.00 77,867.0 COMB GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF $404,503.00 137,594.0 COM Direxion Auspice Broad Commodity Strategy ETF $424,670.00 138,802.0 BCI abrdn Bloomberg All Commodity Strategy K-1 Free ETF $1,121,260.00 402,311.0 DJP iPath Bloomberg Commodity Index Total Return ETN $1,202,880.00 437,178.0 KRBN KraneShares Global Carbon Strategy ETF $1,319,910.00 701,624.0 GSG iShares S&P GSCI Commodity-Indexed Trust $2,151,460.00 4,021,426.0 COMT
iShares U.S. ETF Trust iShares GSCI Commodity Dynamic Roll Strategy ETF $4,178,870.00 982,356.0 DBC Invesco DB Commodity Index Tracking Fund $4,434,120.00 6,573,565.0 FTGC First Trust Global Tactical Commodity Strategy Fund $4,667,660.00 2,411,190.0 PDBC Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF $8,873,230.00 8,906,833.0 What factors should be considered when investing in commodities? When investing in commodity trading, you mainly need to consider the type of commodity, the supply and demand rules of commodities, and the highest profit that can be generated at the lowest cost. 1. Consider the type of commodity Currently, the most popular types of commodities for investment are: crude oil, gold, industrial metals, etc. Crude oil: Crude oil is currently the most important energy product. Crude oil can not only refine gasoline, but can also be used to make asphalt, fertilizers, plastics, solvents, cosmetics, etc. The market has a relatively stable demand for crude oil. It is an indispensable commodity in the world, so it has become the investment target of most investors. Gold: Gold investment has a long history. In the history of financial investment, gold's performance in fighting inflation has made it the most attractive precious metal investment product, and it has also become one of the investment options for most investors to diversify risks. Industrial metals: The global demand for industrial metals can be said to be second only to oil, which gives it a relatively stable investment market. There are a large number of industrial metal financial investment products on the market. As a result, investors can have more choices to plan their investment portfolios for more effective financial investments. In addition to these categories, many categories in agriculture and animal husbandry also involve the food and clothing problem of the global population, so they also have a good variety and quantity of financial products. 2. Consider the laws of supply and demand for commodities The characteristic of bulk commodities is that in each individual commodity industry, the products provided by suppliers are basically the same, and it is difficult to cause price differences due to different suppliers. For example, if Company A and Company B are both lumber suppliers, it is difficult for Company A to have a higher price because Company A is better. However, if Company A and Company B are both mobile phone suppliers, it is very likely that the price will be higher because Company A is better. Therefore, in the commodity trading environment, what determines price fluctuations is the balance of supply and demand in the overall environment. For example, during COVID-19, due to the reduction of labor force, the supply of wood decreased, so in 2021, the price of wood soared, and for example, the oil shortage caused by the Russia-Ukraine war caused a rapid rise in oil prices. When traders invest in commodity trading, they need to pay attention to the supply and demand relationship of the target commodity in a more overall environment. 3. The highest profit that the lowest cost can generate Commodities serve as raw material suppliers for various industries. The lower the cost, the better the performance of the commodity industry when the market fluctuates. This is because when the market fluctuates, even if the prices of other products fall, as long as such products are needed in the market, the corresponding commodities, even if the profit is very low, can still make profits. What are the risks of investing in commodities? Although the factors that cause price fluctuations in commodity transactions are broader than those in ordinary transactions, there are still a variety of risks when investing in commodities. 1. Main risks
In the process of commodity trading, the most important risk factors are world events, global competition, government regulations, import controls and significant changes in economic conditions. These factors will have a rapid and direct impact on commodity trading. Therefore, investors need to pay attention to national and world policy developments related to target commodities in a timely manner. 2. Consider the international economic environment In addition to the commodities themselves, various national and international policies and events in the field of commodity-related products will cause commodity trading risks. International monetary policies will also cause commodity trading risks. Because most commodities are traded internationally, changes in currency exchange rates will affect the commodity price trends in relevant countries, which in turn will lead to fluctuations in the trading market. 3. Assets are too concentrated Because the number of commodity categories is relatively small compared to other industries, when investing in commodity trading, assets are relatively concentrated, and there are currently a limited number of ETF products for commodity trading. Therefore, if you only invest in commodity trading, assets are likely to be concentrated in a certain area, which will be more obviously affected when the market fluctuates. Therefore, when it comes to actual investment, it is appropriate to consider commodity trading as part of the investment portfolio, not all of it. 4. Other risks Funds whose main objects are commodities usually use futures contracts to track target commodity prices or price indexes. However, futures contract investments are highly speculative investments with great volatility, which may lead to huge differences between the performance of the fund and the performance of the commodities themselves, ultimately leading to wrong judgments by investors. Commodities vs Stock Investing Commodity trading and stock investing often have a certain negative or low correlation. For example, when oil prices rise, oil-related stocks may fall, but commodity trading markets rise. The difference between the two is: Commodity Trading Stock Trading The main factor in price fluctuations is the overall supply and demand relationship in the market Price fluctuations are often determined by company performance The commodity trading market is an all-weather market and is closed on weekends. Open for 8 hours of trading on trading days Commodities trading generally has lower liquidity, so trading spreads are typically higher Stock trading is highly liquid and trading spreads are low