The commodities market trades primarily commodities rather than services and is divided into "soft" and "hard" commodities. "Soft" commodities are mostly agricultural commodities, while "hard" commodities are generally those extracted from the subsurface. Commodities are traded on futures contracts and are highly dependent on supply, demand, politics, sanctions, production levels and even the weather.
When trading commodities, it is important to keep an eye on news, weather, and politics to understand what will affect these versatile instruments - for example, fluctuations in oil prices during OPEC meetings, heavy rains cause wheat prices to rise, and a rise in gold reflects a weaker U.S. dollar. Armed with knowledge of global economic issues, you can take advantage of favorable trading conditions without commissions.
There is a low margin on goods, so trading conditions for all goods are very competitive. Leverage up to 1:500.
Commodities are raw materials that can be bought and sold. Commodities such as metals and energy are used as resources to produce goods and services.
Metals (gold, silver, copper, palladium, platinum) and energy products (crude oil, natural gas) are called "hard commodities" and can be mined or extracted.
Because of their role in the economy and their nature, the price of commodities moves independently of other assets, such as stocks, and therefore can offer valuable diversification for traders and investors. Metals and energy commodities are essential to industrial production. They are widely used by manufacturers, making their price movements relevant to the global economy.
Buying and selling commodities does not require you to buy or sell a physical product. You simply speculate on price changes, just as you would with other derivatives.
Commodities are finite resources. Therefore, unlike many other assets, the price is primarily affected by changes in supply and demand. Generally, when supply increases, prices will decrease. If supply decreases, prices may rise.
Supply and demand are also affected by several factors such as weather conditions, economic activity, and geopolitical changes.