Investors around the world choose commodities as a means of either advancing their trading strategies or hedging against investments in stocks, forex or cryptocurrencies. But which commodities are they choosing?
In this article Finance Monthly discusses five of the best, looking at the current market conditions and how things might change in the near future. But first we’ll discuss why you might want to trade commodities.
Why Choose Commodities?
Commodities usually reflect trends in the world at large, and so are a good vehicle for those with their finger on the pulse of international markets and political conditions. They are also generally inversely correlated to the stocks and shares market, making them a useful means of protection from risk in your other investments.
You could even use them to hedge against forex trades, provided you use a trading platform that gives you fast and reliable access to as many markets as possible.
And when it comes to choosing commodities to trade, these are the five that we believe you should know about in 2018:
With tension continuing across the oil-producing world and growth predicated in emerging markets, this commodity is a good choice for the rest of this year. In fact, the Goldman Sachs Group Inc. has given Brent Crude an ‘overweight’ recommendation for the current period, meaning that they believe this is a commodity worth adding to a trading portfolio.
High output in countries such as the US and Russia has continued to keep prices lower than they should be for natural gas, but this could change – especially towards the tail end of the year when the Northern Hemisphere moves into winter and demand increases. In fact, demand for natural gas is already outstripping supply in China, and this will surely have repercussions on the price of this commodity worldwide.
Disruptions in mining output, coupled with urgent demand from the electric car industry, have caused the prices of copper to soar recently. This trend may not continue with such force, but over the course of 2018 prices are expected to rise 9.7% from 2017 levels. In other words, copper is still a commodity you should definitely know about.
This commodity is used in vehicle catalytic converters, and so enjoys demand from the automotive industry. As the trend of converting from diesel to unleaded petrol and hybrid electric continues, so too should the price of palladium rise. Palladium has even started to reach the price levels of platinum, giving just some indication of how in demand this commodity is.
A top performer in 2016 and 2017, this base metal is beset with supply problems which could see it to another strong year in terms of price growth. Another factor is demand from the Chinese market, which looks set to continue its increase for Zinc and similar commodities.
Of course, there are other commodities to watch in 2018, but these five commodities should provide a good starting point for building a strong investment portfolio.