Commodity investing goes back centuries, even before the emergence of stocks and exchange markets. This business links different cultures and people together, by investing directly in the physical commodity, or indirectly by purchasing shares in the commodity companies.
Through commodity trading, the investors are protected by the impact of inflation as the price of commodities goes higher during high inflation. It also diversifies an investor’s portfolio, while decreasing the risk in the base currency.
While there are several commodities to invest in for profits in 2021, here are few most profitable commodities investing ideas for you!
7 Most Profitable Commodities Investing Ideas
Here is a list of commodities you can invest in this year.
As crude oil tops the list in commodity investing, the demand of crude oil increases everyday as it is used to make gasoline and other items such as cosmetics, fertilizers, plastics and even medicines. Once refined crude oil can be used as gasoline, diesel and other petrochemicals. The price of crude oil fluctuates as it gets affected by the political conditions in the Middle East, being the biggest supplier.
With crude oil becoming more active in the market, it is affected by a wide array of world news and its price fluctuation happens as it provides several opportunities to the traders to take part in and make profits this season. The demand for crude oil is the highest in summers, but is also high in winters as it is used as heating oil.
It is usually exchanged and traded in the form of Light Sweet crude oil on New York Mercantile Exchange and as Brent Crude in London, with price quoted as US dollars and cents per barrel.
Gold being one of the oldest currencies in the world, has become an essential part in the financial world as it is considered one of the top commodities to trade-in due to its stability and worldwide acceptance. It can be used in the form of jewelry and other electronic applications such as in mobile phones, GPS systems, TV’s etc. Also, in other industries in products like glass making, medicinal purpose and dentistry.
With an annual consumption of about 700 tons a year, gold commodity trading remains a safe haven and protection against economic meltdown. It usually is highly liquid and profitable with price fluctuations depending on macroeconomic and political factors.
It can be easily bought on Multi Commodity Exchange for a minimum size of 1 kilogram and the profit & loss being Rs. 100 per tick.
Natural gas is considered one of the cleanest fuels in the world and also very environment-friendly. Over the past few decades, the demand of natural gas has gone up due to its environment-friendly nature, as it is most recommended by the government and the power industry.
Even though it has a lower price compared to oil, it is still expected to keep rising. It can be used in compressed nature called CNG in the automobiles. The prices of natural gas depend on the prices of oil in Asia, as trading is highly affected by imports and exports, economic growth, storage levels and seasonal variation. It can be found on MCX with a lot size of 1250 million British thermal units (mmBtu).
One of the leading essential item commodities, coffee is always in high demand even in the case of unfavorable economic conditions. This means it is usually at a lower risk, however, the profits are also limited. Investing in coffee is usually done through contracts and derivatives, instead of exchanges and shares.
With Central America and Mexico being the major producers of Arabica Coffee, it is an essential product with more than 1.3 million people depending on coffee cultivation. Having different weather conditions than Brazil, there is more growth of coffee here with cheaper labor cost, and gives Central America a competitive edge in coffee investing.
As aluminum is lightweight, versatile and is used in numerous industries, it has become the biggest commodity consumed all around the world. It is used in manufacturing industry such as aerospace, automobiles, packaging, electronics and construction.
Due to its extensive use, the price movement highly depends on the demand and supply of the products. As manufacturing industry is a major part in the GDP of a country, aluminum is indirectly a big factor in the contribution to the GDP of the country. Its price is also affected by the price of oil and electricity and transportation. Therefore, aluminum is an excellent commodity to invest in. It is exchanged with a lot size of 5000 kg’s or 5 tons.
One of the widely used metals on earth, copper is used in several industries such as electrical wiring, plumbing, utensils, roofing and even industrial machinery. It is also an effective conductor of heat and electricity and therefore, has several versatile properties and usage and is best to invest in.
The price of copper fluctuates based on the strength of the economy and the demands emerging in the construction and transportation markets, also depending on disruption in the supply due to political, environment or legal issues.
It is usually traded for industrial growth of the world, and is traded as bullions or as derivative instrument contract for difference (CFD) with a lot size of 1 ton.
Nickel, being a lustrous, strong, ductile and resistant to corrosion metal has a very high melting point and catalyst properties. It is also used in several industries such as the electroplating process in the manufacturing of stainless steel.
It is a commodity playing an important role in the growth of the economy, with price movements depending on the demand and supply of nickel. It is usually traded in exchanges such as MCX, NMCE and NCDEX, but is mainly controlled at the London Metals Exchange and is traded in a lot size of 250 kilograms.
The Bottom Line
Every commodity mentioned above has its unique characteristics making it the best option to invest in. Based on these unique characteristics and how they work for the trader’s personal objectives, knowledge and risk parameters, choose the best commodity for yourself to invest in 2021.