Understanding The Commodities Sold On The Commodities Market

by Nirav Singhaniya Financial Advisor

Commodity exchanges are organised and regulated marketplace for selling and purchasing a wide variety of contracts. The prices of these contracts are linked to the prices of the commodities being bought or sold. Commodities, on the other hand, form a crucial part of our daily lives. For instance, if you own a car, you will automatically get affected by the rise in the prices of crude oil. More and more investors today are turning to the commodity market to invest in their choice of commodity online. Commodities provide you with an excellent option to diversify your portfolio on a long-term basis. It also provides you with the option to park your cash when the market is unusually bearish or volatile.

Commodity Types

Currently, you have the option of trading a wide variety of commodities in the commodity market in India. However, in essence, these commodities can be divided into the below mentioned four categories:

Base Metals (like Aluminium, Brass, Copper, Lead, Nickel, Zinc etc.)
Bullion (like Gold, Gold Mini, Silver, Gold Guinea, Silver Micro, Silver Mini)
Energy (like heating oil, crude oil, gasoline and natural gas)
Agricultural (such as soybeans, corn, rice, wheat, cardamom, castor seeds, sugar and coffee)

When the stock market conditions are bearish or volatile, fearful investors often look to transfer their money to commodities like gold. This is because gold since time immemorial has been considered to be a safe haven and one of the most reliable metals in the commodity market. In fact, precious metals like silver, gold, platinum etc. are also used for hedging during periods of high inflation or devaluation of the currency.

On the other hand, the ups and downs in the energy market also affect the prices of commodities across the globe. Global economic growth and reduced output of oil from the wells across the globe result in an increase in the prices of oil. This is because investors often assess and weigh limited supplies of oil with an increase in demand for energy commodities. When it comes to investing in the energy commodities, you must also take economic slowdowns, changes in the production of the Organisation of the Petroleum Exporting Countries (OPEC) as well as emerging technological changes (like solar, biofuel and wind technologies) that affect the prices of crude oil into consideration.

Similarly, agriculture-based products are considered to be some of the most actively traded commodities in the commodity market in India. They are highly volatile during the summer months or at the time of transitions in the weather. When it comes to investing in the commodity market, you can use several options such as futures, stocks related to commodities, stock options, commodity ETFs, commodity ETNs as well as Index funds and Mutual funds. If you’re interested in buying or selling of commodities, you must turn to reputed commodity online exchanges and track the commodity market live prices. Once you are familiar with the prices of different commodities, you can choose the commodities that you wish to invest in.

Conclusion

To sum up, you have multiple options when it comes to buying/selling of commodities. Irrespective of whether you are novice or experienced, you can choose the commodities to diversify your investments and earn profits. Even though commodity futures provide you with the option of participating directly in the price movement of commodities, you have the option of turning to other investments types that come with varied risks as well as investment profiles. Well, why wait? Open a trading and demat account with a reputed stockbroker like IndiaNivesh Ltd. and start trading today.