Commodities

Commodities are tangible raw materials used in industry and consumption. They are typically divided into energy commodities like oil and gas, precious metals like gold and silver, industrial metals like copper, and agricultural products like wheat and cotton.

Commodities are traded in spot markets, futures contracts, and contracts for difference (CFDs). Their prices are influenced by supply and demand dynamics, geopolitical conditions, weather patterns, and decisions made by producing organizations such as OPEC.

Key characteristics of commodity trading:

• High Volatility: Driven by their sensitivity to global events.
• Correlation with the Dollar: Most commodities are priced in US dollars, meaning their prices are inversely affected by the dollar's strength.
• Hedging Role: Used as a hedge against inflation.

Trading commodities via CFDs or futures provides market exposure without requiring physical storage of the asset. A common mistake is overlooking fundamental reports, such as US crude oil inventories or agricultural production reports, which can trigger sharp price movements.

Commodities are traded on spot markets and futures exchanges, while platforms like EVEST offer CFD trading on them with flexible hours spanning most of the week—particularly for precious metals and energy—whereas some agricultural and industrial commodities follow narrower trading schedules tied to their underlying exchanges. Each contract's specifications vary by unit of measurement, such as barrels for oil, ounces for metals, or tons for agricultural goods, which dictates the value of each price movement point. Among the main advantages of trading commodities are diversification beyond traditional financial assets and capitalization on different economic cycles, in addition to their function as an inflation hedge during periods of widespread price increases. Conversely, their risks include sharp volatility driven by geopolitical developments, weather conditions, and production quota decisions, alongside their price sensitivity to movements in the US dollar, in which most global commodities are denominated. Common mistakes include ignoring the economic calendar for inventory and production reports, as well as failing to account for time-zone differences between trading sessions that affect liquidity levels and spreads. Commodities are linked to the forex market, often holding an inverse relationship with the US dollar; furthermore, the currencies of commodity-exporting nations, such as the Canadian dollar and the Russian ruble, are directly affected by price swings in oil and metals.