5 of the Most Traded Commodities in the World
The commodity market is popular with many traders, partly because of the high levels of volatility which can be present, allowing traders to profit from both rising and falling prices. Moreover, commodities offer traders and investors an opportunity to diversify their portfolio, which is an important part of risk management.
In this article, we will take a close look at five of the most traded commodities in the world and how you can trade them!
Table of Contents
What Are Commodities?
Commodities can be either raw materials or agricultural products which, although sometimes a good in their own right, are generally used as the “building blocks” for other goods and services. The word commodity, therefore, covers a myriad of different goods, from sugar to crude oil, from cotton to steel.
Commodities of the same type and the same quality tend to be interchangeable, or fungible, with each other and, therefore, hold the same value to consumers. For example, coffee produced in Colombia will have more or less the same value as coffee produced in Kenya, provided they are of the same quality.
So, what are the most traded commodities in the world?
5 of the Most Traded Commodities in the World
Over the next few sections, we are going to take a close look at 5 of the most traded commodities in the world.
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Brent Crude Oil
The first two entries on our list of the most traded commodities in the world should come as little surprise.
Despite moves towards greener energy in recent years, crude oil is still very much in high demand. It powers our cars, heats our homes and produces fertilisers, pesticides and plastic.
Brent Crude is one of two major types of crude oil which act as global benchmarks for the industry, the other being WTI crude. Brent Crude is extracted from the North Sea and is characterised as a light, sweet crude oil.
Light because of its low density and sweet because of its low sulphur content. Both of these qualities result in Brent Crude being relatively easy to refine.
WTI Crude Oil
West Texas Intermediate (WTI) crude acts as another benchmark for global oil prices and is also one of the most widely traded commodities in the world.
It is drilled in various states throughout the US and is also described as both sweet and light, having even lower sulphur content and density than Brent Crude.
The prices of both WTI and Brent Crude historically have positive correlations with global economic growth. When the economy is growing, demand for oil inevitably increases which drives up its price.
Natural Gas
Natural gas is another important source of global energy, which is found deep below the surface of the earth. Although a non-renewable energy source, natural gas is the cleanest burning fossil fuel and is very versatile, meeting a lot of the same needs as crude oil.
As the world cuts emissions in an attempt to reach net zero by 2050, the use of both crude oil and natural gas will inevitably need to be curtailed. However, due to producing less emissions than oil, it is expected that natural gas will continue to be a major source of global energy during the transition.
Gold
A precious metal which has been sought after for centuries, gold is now primarily used for jewellery production and as a vehicle for investment and is primarily mined in China, Australia, Russia and the US.
Gold is one of the most traded commodities in the world but, in times of uncertainty, it often becomes even more popular with investors. This is because it is considered a safe haven asset, meaning that it tends to retain value or even rise in price during times of economic and political upheaval.
Silver
Another precious metal, silver has also been historically sought after by mankind for many centuries. Unlike gold, around half of silver’s demand arises from its industrial uses, such as in solar panels and electrical products.
However, like gold, a lot of its demand is controlled by jewellers and investment. Whilst silver is also considered a safe haven asset, it is not seen to be as reliable as gold due to the fact that gold's value is less dependent on industry.
How to Trade Commodity CFDs
Commodities are tangible assets which can be bought or sold; however, buying and selling these products in large quantities present logistical challenges for traders and investors.
Therefore, traders looking to speculate on the price of any of the most traded commodities on our list can do so using financial instruments, such as Contracts for Difference (CFDs). Commodity CFDs allow traders to attempt to profit from both rising and falling prices without ever taking, or delivering, ownership of the underlying commodity.
In order to start trading commodity CFDs, follow these steps:
- Open a Trade.MT5 account and log in to the Dashboard
- Find your account details in the dashboard and click ‘Trade’ to open the MetaTrader Web Trading Terminal
- Search for the commodity you want to trade in Market Watch and drag it onto the chart to open its price history
- Click ‘New Order’ at the top of the screen, enter the volume of your trade and click ‘Buy’ or ‘Sell’ to send your order to the market
Trade Commodity CFDs With Admirals
With a Trade.MT5 account from Admirals, you can trade CFDs on many of the most traded commodities in the world as well as a wide range of other financial instruments! CFDs allow traders to attempt to profit from both rising and falling prices and also benefit from the use of leverage. Click the banner below to open an account today:
About Admirals
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of, or recommendation for, any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
