So What Are The Best Commodities To Invest In March
The coronavirus brought a lot of uncertainty to financial markets. What started in China as an isolated event has quickly escalated into a global problem.
Financial markets were quick to react, and stock indices around the world dropped in the blink of an eye. Last week, we saw the Federal Reserve of the United States delivering an emergency cut of 50 basis points. The last time the Fed cut between two ordinary meetings was in 2008 during the infamous financial crisis.
As such, the cut had a rather negative effect on the stock market: the Dow Jones tanked another one thousand points following the news.
With the world remaining in crisis mode, what are the best commodities to invest in right now?
What Is Commodity Investing
Commodity trading goes back centuries, even before stocks and bonds exchanged hands. It was a very important business, linking different cultures and people. From spices and silks in the early days to the exchanges where these assets are now traded, commodities are still a popular investment vehicle.
Investors hoping to get into the commodity market can do so in several different ways. Commodity-hungry investors can consider investing directly in the physical commodity, or indirectly by purchasing shares in commodity companies, mutual funds, or exchange traded funds .
Commodity Market Overview: Unprecedented Volatility Drives Markets
The commodity market is seeing an unprecedented shift in value. Gold climbed to its highest level since late 2012 in April and is again approaching resistance above $1,700 per ounce.
Central banks around the world have cut interest rates and boosted spending to support their economies, driving investors towards gold as an intrinsic store of monetary value while currencies become devalued. Gold ETFs have been reporting record net inflows in recent months in the flight to safety.
The palladium price soared to a record high in February, but has since dropped back sharply, missing out on safe-haven support from the gold rally, as Covid-19 lockdowns have reduced demand for palladium-based automotive catalysts. Platinum and silver have also come under pressure from the disruption to industrial consumption.
The demand destruction caused by the lockdowns coinciding with oversupply and the Saudi-Russia price war resulted in a 70 per cent drop in crude oil prices last month. They subsequently rebounded as investors engaged in bargain-hunting with some countries beginning to ease their restrictions on social and economic activity.
With so much uncertainty hampering financial markets, what are good commodities to invest in during May? Read on for five suggestions of commodities investments that could make near-term gains.
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Pros And Cons Of Commodity Investments
As an overall investment type, commodities are reliant on the laws of market supply and demand. This can obviously have its upsides and downsides, as volatility can run rampant with so many outside factors affecting every commoditys production and sale. Below we detail some of the benefits and concerns of each commodity:
|Professional management comes with proprietary fees Indirectly invested in commodities|
Next Candidate Is Platinum
Platinum had a solid run from August 2018 it deserved to be selected as one of the best precious metal to invest in 2020.
The lowest price for platinum was $757,34/oz and the highest today at $889,40/oz. That said, whats interesting with platinum is the low volatility in the past six months.
It is a safer trading alternative Vs. Gold but it is not so rewarding. The same technical analysis was applied, and the founding is not so surprising for platinum prices. MACD signals an increase in demand for platinum and Ichimoku clouds are confirming the uptrend.
Also, a correction is to be expected at $834,63/oz with possible new lows at $811,13/oz. That said, platinum is closer to be crowned as the best metal to invest in 2020.
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Best Performing Commodities In Q3 2020
The commodity market performed relatively well in the third quarter, higher after the worst pandemic known to man disrupted financial markets at an unprecedented level.
That said the commodity market is made up of primary commodities like crude oil, cocoa, coffee, corn, hog, gold, silver, platinum, and so on, that trade on major global exchanges found in the United States and the United Kingdom.
There were 20 commodity assets, double-digit gainers, in Q3 2020 with 5 of them surging above 25% in three months.
During the specific time period in review, all of the commodity sectors posted gains. Thirty products posted gains with twenty double-digit percentage increases.
What you should know Commodities are basically raw materials. They play an important role in most aspects of the daily lives of Nigerians, serving as food , energy , and sources of income for many global investors.
As commodities can be an important way to diversify their portfolio beyond traditional securities. Commodities play a vital role in Nigerias economy, accounting for more than 90% of its export.
Common ways to invest in Commodities
Explore Data on the Nairametrics Research Website
Disclaimer: Nairametrics would like to remind you that the data contained in this website is not necessarily real-time.
Investing In Gold Etfs
Gold exchange-traded funds are linked to gold prices. Each unit of the ETF is attached to a certain value of the commodity. Gold ETFs invest as well as hold the physical commodity on behalf of their investors. Whenever an investor invests in them, the physical commodity is stored even when this is not seen.
Normally, gold ETFs are divided into two categories. These are those that own the physical gold and those who own the mining stocks. Before you begin investing, you must decide if you prefer exposure to the physical commodity or public companies that mine it. Each of these asset classes has its different risk profiles.
Investors who are focusing on gold ETFs should consider the following:
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Sociedad Qumica Y Minera De Chile Sa
Number of Hedge Fund Holders: 14
SQM is one of the biggest producers of lithium, an in-demand commodity amid the rise of EVs and energy storage solutions worldwide. The company has production facilities in the Atacama Desert, Chile. The stock has gained 130% over the last 12 months. The company recently said it plans to announce a project that would double its lithium hydroxide production to 60K per year tons from 30K. The company posted upbeat Q4 results as its lithium sales volumes jumped 50% as compared to the previous quarter.
As of the end of the fourth quarter of 2020, Citadel Investment Group owns 1.1 million shares of SQM worth $55.3 million. SQM accounts for 0.01% of Citadel’s total portfolio.
Are Commodities A Good Investment
Like any good investment, commodities can also come with risks. An investor needs to understand the markets of the commodity in which they wish to tradeâfor example, the fact that oil prices can fluctuate based on the political climate in the Middle East.
The type of investment also matters ETFs provided more diversification and lower risks where futures are more speculative and the risks are higher because of margin requirements.
That being said, commodities can hedge against inflation, and gold, in particular, can hedge against a market downturn.
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Lowest Cost Commodities Generate The Most Profit
As a result of unpredictable markets, the best commodities are often the ones produced at a low cost. The reason for this is that commodity industries with high overhead costs are less able to adapt to declining prices. After all, they have higher expenses to cover to make their margins. Commodities with low overhead costs are therefore better able to adapt to fluctuations, as the producers still stand to make money when selling units. Keep this in mind as you research different options and learn about market demand.
Certain Commodities Are The Best Investments
Looking at the strengthening global economy, energy commodities and industrial metals look like good investments in 2021. Also, metals like copper, lithium, and nickel, which are used in electric cars, could be a good way to bet on vehicle electrification. Copper is already trading at multi-year highs. Copper could see more gains amid strong demand and tepid supply growth.
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Bdry Grn And Krbn Are The Best Commodities Etfs For Q1 2022
Many investors are hesitant to buy individual commodities, but exchange-traded funds make this area accessible to a broader range of investors. Commodities can be a useful hedge against inflation, and they help diversify investment portfolios beyond more traditional stocks and bonds. Commodities such as silver and palladium also are seen as safe havens in times of market uncertainty, while demand for a commodity like copper may strengthen due to increasing manufacturing and construction activity.
Commodities ETFs offer a way to gain exposure to one or more commodities while reducing the risk inherent in investing directly in a single one.
Best Commodities To Trade And Become Rich In 2022
- CategoryBasics of Stock Market,
Trading in commodities is one of the most preferred options among traders as they add diversification to your portfolios. Also, it is a lucrative avenue to earn strong returns over a period of time.
But traders who are new to the commodity market might wonder, Out of 120 different commodities to trade, which is the best commodity for me to trade India?
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Is Palladium A Precious Metal
Palladium is a commodity but not a precious metal the reason for adding it to our list of candidates is because of the increase in demand.
In 2017, the price was at 2,173 units and increased for the past two years to 2,332 units in 2020. You might say ok, so what is the big deal? How can Palladium be the best metal to invest in 2020?
The answer is simple: palladium is used in catalytic converters the same catalysis used for cars that reduce harmful emissions of 90%. That said, more cars are built every year with the increase of the world population more palladium will get used for catalysts.
Therefore, the imminent increase in demand with expectations of the process to reach its $3,429 by 2022. As a result, after hitting its highest point of 65,081 units in March, palladium started to fall and meet the correction at 53,701 units.
Gold Has Always Been One Of The Top Commodities To Invest In
Gold comes at the top of the list. It has a safe-haven role and it is the only form of money that survived for thousands of years.
In times of crisis, like these days, investors find refuge in gold and it has the effect of protecting the portfolio. Typically, in a risk-off situation, the price of gold advances.
Gold broke higher in 2019 and seems poised to go for a new high above the $2,000 level. For more than five years, the price “worked” on a reversal pattern an inverted head-and-shoulders pattern that ended in the middle of 2019 when the price overtook the neckline.
It seems to be just a matter of time until we see the precious metal hitting new highs, as the current tensions in financial markets are likely to keep the momentum going on for the gold market.
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How To Invest In Crude Oil
Investing in physical crude oil isn’t as easy as investing in other commodities you can’t just buy a barrel of oil. As an investor, you may consider futures the most direct method of owning the commodity outright. But futures can be highly volatile and need a good deal of capital. And they also require a great deal of knowledge, so it’s not really a good option for novice investors.
Investors may consider purchasing stocks in oil companies, crude oil mutual funds, or even ETFs. These vehicles trade on exchanges just like stocks, so they’re easy to come by. The U.S. Oil Fund is one example. It tracks the movement of West Texas Intermediate light, sweet crude oil.
Other options include buying shares in mutual funds or energy sector ETFs, which invest directly in oil company stocks. These options tend to come with lower risks because they have more diversified offerings.
How To Use Etfs To Invest In Commodities
ETFs are a great option for those who are interested in fluctuating commodity prices but dont want to necessarily purchase futures contracts. ETFs refer to exchange-traded funds and act as a collection of securities. They can be bought and sold similar to stocks, with prices changing throughout the trading day. Investors hoping to purchase commodity ETFs can do so with the help of an online or traditional broker. It is worth noting that not all commodities have associated ETFs therefore, investors with a specific commodity in mind may need to look elsewhere.
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What Are The Best Commodities To Invest In
When choosing a commodity to invest in, there are two important factors to consider: supply and demand. While most commodities benefit from a consistent or global demand, some have performed better over time than others due to their limited supply. Beginner investors should consider these commodities as a great place to start:
What Is An Exchange
This is a type of investment or exchange-traded product that is traded on a stock exchange. They are quite similar to mutual funds.
The difference is that they are bought and sold throughout a day from other owners on the stock exchange. Mutual funds on the other hand are bought and sold based on their price at the end of the day from an issuer. You can find more information here.
ETFs are a kind of security that is used to track an index, a commodity, sector, or other assets. They can be structured to track individual commodities like gold as well as large and diverse security collections. They are marketable securities and this means they can be bought or sold.
They operate with a mechanism that is designed for them to be close to their net asset value but occasionally, deviations may occur. There are several kinds of ETFs available. Some of these are the S& P 500 index, the NASDAQ-100 index, the total market index, etc.
Some of these large exchange-traded funds charge annual fees of around 0.3% of the invested amount and sometimes lower. Specialty ETFs however can charge up to 1% of the investment as annual fees. These annual fees are paid to the issuer from the dividends received from underlying holdings or sales of assets.
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Commodity Market Overview: Lower Dollar And Supply Issues Push Up Prices
Supply issues combined with the weaker dollar have been driving commodities prices sharply higher this summer. The Dollar Index , which measures the value of the US dollar against a basket of other major global currencies, has fallen to around 93, its lowest level since early 2018.
The spot gold price, which tends to trade in an inverse correlation to the dollar, climbed past its previous record high of $1,921 per ounce from 2011 to reach $2,089 per ounce in early August. Copper prices have risen as inventory levels have fallen to their lowest since 2007, coinciding with rebounding industrial demand in the US and China. Natural gas prices have spiked on lower production, and the market is set to tighten further as demand rises heading into the winter.
The US Federal Reserve announced a shift in its view towards inflation on 27 August, signalling that it will tolerate inflation higher than its usual 2 per cent target as it plans to keep interest rates lower for longer in the coming years. Low interest rates tend to weaken the dollar, indicating policy will continue to support commodities prices.
Fundamentals for the USD are not supportive, note analysts at Citibank. Over time, the natural state of affairs for the USD is lower, based on valuation, negative external balances and now a Fed willing to supply unlimited cheap USD into the global monetary system.
Risk Cover Cover Your Assets The Biggest Asset Is Your Health & Yourself
Though this does not qualify as an investment, a good risk cover can save you money from emergencies that arise due to health and sickness or loss of income due to death of the wage earner in the family. Periodic review of your health and life insurance is important to keep the sum of the cover relevant to changing needs. Apart from this, its also important to cover movable assets like Automobiles, equipment at home or office and immovables like house or commercial property
In conclusion, as demonstrated by Nobel prize winner Harry Markowitz in his Modern Portfolio Theory , a diversified portfolio taken as a whole is less volatile than its individual asset components considered independently. Therefore, risk should be evaluated at a portfolio level instead of considering it at an individual asset level.
How To Use Futures To Invest In Commodities
Futures are a great opportunity to invest in commodities, especially if you are familiar with the market you are investing in and are interested in speculating on price changes. Futures contracts are essentially agreements made to buy or sell shares at a certain time in the future, for a predetermined price. Investors can profit from futures contracts when the value of the commodity changes. This can be done on a short or long-term basis.
Getting started in futures contracts does involve a lot of research on the industry, and is typically not recommended for beginner investors. The reason is that a lot of futures investing revolves around speculation. However, investors can work with a broker or opt for contracts with an option to buy. These methods can help investors who may not be familiar with market analysis benefit from the profitability of futures.