Commodity

Commodities

Commodities is simply a label applied to items that are produced to satisfy human wants or needs. A commodity can be bought or sold through futures contracts on specific exchanges. An exchange will usually specify a minimum quality and quantity that can be bought.

People like to trade commodities as they use them in everyday life. The price direction of commodities can sometimes be easier to predict than shares in companies.

Companies will also trade in commodities. A typical example of this is an airline betting that crude oil prices will rise. By making money if crude oil rises, they can offset any loses the company would make by spending on petrol during flights. This is known as hedging, and means the airline company can apply a set cost to crude oil, when designing future business plans.

Top 10 traded commodities (in order of popularity) ;

1. Crude Oil
2. Coffee
3. Natural Gas
4. Gold
5. Brent Oil
6. Silver
7. Sugar
8. Corn
9. Wheat
10. Cotton

Gold

Many people like the idea of buying gold as the price never seems to drop. Due to the collapse of several banks over the past decade, gold is now also seen as a safer investment. As you can see below, the price of gold has generally risen over the last 20 years.

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The chart clearly shows that investing in gold over the last 20 years would have provided a better rate of interest than leaving money in a savings account.

Why Invest in Gold?

Gold has always seemed to play a pretty big role in world history. Many cities exist or don't exist today because of the discovery of gold or because of the greed inspired by gold.
At one point in time all the currency in the United States was backed up by gold.

Investing in gold and silver is typically done as a safe-haven against political, economic, social, currency-based or other crisis.
Typically when the economy is struggling the price of gold and other precious metals goes up dramatically.
How to Invest in Gold?

There are different approaches to take. You should make sure that the approach you take is right for you and fits your comfort level. Some possibilities include:
Directly through gold coins or gold bullion investing
Indirectly through investing in gold options, investing in gold stocks, gold exchange traded funds, accounts, or certificates

Historic Gold Investing Prices

I made a couple of charts for you to reference to help understand where the price of gold has been in the past.

Gold Prices: Last 110 Years

Gold Prices: Last 20 Years

Oil

Crude oil is one of the most talked about traded commodities as it has the widest impact on society. It affects many sectors such as the transport sector, the energy sector and of course the oil & gas sector! As a commodity, crude oil is normally purchased in batches of 1,000 barrels.

Crude oil can be invested in directly through commodities and also indirectly through oil ETF’s and stock in individual oil companies.

As you can see by the chart below, demand currently heavily outweighs supply of crude oil, meaning the price of oil has risen sharply over recent times.