The Commodity market is the market which deals with primary economic goods for example Coffee, gold, Copper etc. It is the exchange of different such assets typically as futures contracts. The Multi commodity exchange of India is India’s first commodity exchange.
Since retail investors have grown beyond trading in shares and securities amidst the growth of Cryptocurrencies and commodities, Let’s take a look at some of the best Commodity stocks to invest in 2022 shall we?
When compared to most commodities and even equity, Gold is a lot less volatile when it comes to price fluctuations and it has a sense of public sentiment attached to it which creates a cushion for the investors regarding the risk involved. Gold can enhance portfolio stability and improve risk-adjusted returns. The gold market offers high liquidity owing to its unique position within the world’s economic and political systems.
The coffee commodity trading as a whole works based on coffee production, as simple as that. Coffee is a globally consumed beverage which brings about an international level effect to its fluctuations but lets face it, who’s going to stop having their daily coffee. The coffee industry employs millions of people around the world through its growing, processing and trading so it has a lot of other attributes attached to it that makes it a safe investment
Gasoline is a petroleum-derived product comprising a mixture of liquid aliphatic and aromatic hydrocarbons. Gasoline is a widely traded commodity and its wholesale prices are set in deep and competitive markets. It has revived since the early stages of the pandemic taking into consideration much of the rise in retail gasoline prices from their 2020 average. Gas prices also depend on each country’s policies and the politics behind it. Amidst the rise of EV vehicles, one might think gasoline is not the go to investment, but in reality it’s the other way round.
Copper is used in electrical generators and motors for electrical wiring and in electronic goods, such as radios and TVs. Copper has high demand among the industrial materials. Copper being the most largely used metal in energy transmission, generation had a very good run in terms of demand in 2021. By mid 2021 it hit highs of 130% when compared to the pandemic lows. Copper is of utmost essential moving towards the green revolution. A good example would be EV cars which would need 4 times the amount of copper that a gasoline powered vehicle would need.
5. Soft Commodities
Soft commodities are agri related products such as fruit, livestock, cotton etc.
Soft commodities are majorly traded in future markets by speculative investors. These soft commodities are unique because farmers can plant and raise new crops year after year.They are basically future contracts on underlying agri products. Being the oldest traded products in the world there sure seems to be interest in these commodities from the investors.
Lumber is wood that has been processed into beams and planks, a stage in the process of wood production. The trading of lumber is backed by the underlying asset of how much timber has been cut out to form beams and planks. Through the pandemic time, lumber did not take as much of a hit as expected and has been skyrocketing since. Lumber is considered an ever rising ever secure asset to bank your investments in.
7. Crude Oil
Crude oil is a naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials. Crude oil is considered one of the most profitable futures for traders. It is also the most actively traded commodity worldwide. There is lesser scope for emotion based volatility as there is a global level of demand and supply involved in the world of crude oil trading.
8. Natural gas
Natural gas is a naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane. A highly fluctuating commodity, Natural gas is an important part of the world’s energy source.Amidst the volatility, investors choose to go for natural gas owing to the dependence of global energy on it. Natural gas is likely to play a greater role in the world energy mix.
Aluminum is a lightweight metal used for making things such as cooking equipment and aircraft parts. The daily average traded value of big aluminum is roughly about INR 375 Cr. The value is not as high as commodities such as gold and crude oil but can go to about 500cr on a good day. The pros of aluminum is that it can be found in abundance and the demand consumption seems to have equilibrium.
Steel is an alloy made up of iron with typically a few tenths of a percent of carbon to improve its strength. Steel industry and any industry dependent on construction has always been on a flourish especially in the indian market. Real estate highly affects this commodity worldwide.
Currently the demand for steel is soaring and is the right time to invest in steel.
Commodity markets have more often than not exhibited significant price volatility. Commodities are more volatile include issues with liquidity, potential exposure to natural disasters, and geopolitics. Commodities tend to be more volatile than others because both the supply and demand are relatively price elastic. Investors are requested to take caution and follow conservatism while trading.