Best commodities to invest in March 2020: your ultimate guide to the most volatile spring market
11:55, 12 March 2020
If the coronavirus was not enough to make the world’s financial markets tumble, the price of oil has just crashed, opening this trading week 30 per cent lower. It sent a shockwave across all markets, as it slashed inflation expectations around the world.
Typically, gold, silver and platinum act as safe havens during the times of economic and political crisis, while oil has its role of diversifying a trading account. However, commodity market latest news has brought some uncertainty to investors’ portfolios.
Due to plummeting demand, Saudi Arabia wanted to limit oil production in order to sustain prices and was expecting to receive support from its key ally – Russia. However, to the surprise of many, Russia refused the proposal. As a result, the entire industry is now staying at gunpoint, with the oil and gas companies around the globe fearing bankruptcy.
Because of its price slide since the beginning of the year, oil did not make it to our list of the top commodities to invest in March 2020.
Is now a good time to invest in commodities?
Financial markets never stop moving. Even if most markets are closed for the weekend, news influences the opening prices on Monday.
Commodities are part of every broker's offering and they have a dedicated place in almost everyone’s portfolio. Like any security, they all have different levels of volatility depending on the general market conditions.
So, now that the price of oil collapsed overnight, what are the good commodities to invest in March?
What is your sentiment on Silver?
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?
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.
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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.
Silver – another member of our ‘best commodities to trade in 2020’ list
Silver seems to form a bullish flag on the daily chart – a continuation pattern destined to break in the same direction as the previous trend. A move above $18.5 sees the measured move in focus and will probably trigger stops all the way above the $22 level.
Also known as "poor man's gold", silver has an interesting correlation with the price of its more precious sister metal. As the chart above shows, it reversed in 2019, just when the gold price reversed as well. However, it’s worth noting that silver's hike did not match the magnitude of the one seen on the gold charts.
For this reason, silver is the number two on our list of the best commodities to invest right now, as it has the potential to catch up with gold’s upside moves.
Palladium: will the parabolic rise continue?
One of the greatest investments of the past decade was palladium. Supply and demand imbalances have led to the price of palladium rising continuously over the past years. In fact, the white metal almost reached the $3,000 level in a move similar to what Bitcoin did in December 2017.
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For those too scared to buy palladium at the current market valuation, as long as it remains above the rising trend lines the metal still has a chance to further squeeze higher. In terms of Elliott Waves, such a move, like the one on the palladium chart, appears in running corrections suggesting more strength is yet to come.
But what about platinum?
Platinum struggles at the psychological $1,000 level after forming a double bottom around the $800 mark. If the $800 price level holds on the current move lower, adding platinum to the trading portfolio might be wise on a break higher above the $1,000, as the potential for further squeeze is real.
Time to give some base metals a chance: is copper on the list?
Copper is a unique commodity related to global economic cycles. It reflects the business cycle better than any other metal. Often, investors even look at the price of copper as an indicator of economic performance and growth.
Despite weakness in the Chinese economy caused by the coronavirus, copper managed to move much lower. In fact, after it put a double bottom in 2016, it bounced and spent the past two years on a horizontal consolidation.
The focus now for the copper price is on the upper edge of the consolidation area. Presently, it looks like a triangular pattern, and a move above the upper trendline suggests further upside to come.
The bottom line: to invest, or not to invest?
2020 has already proven to be a turbulent year – the new decade started with a life-threatening virus and an oil market shock. Central banks are expected to intervene to stabilise markets as outside factors are largely contributing to the market’s volatility.
Unlike other financial assets, commodities have a unique characteristic – they are finite. It means that the price of a commodity depends a lot on the imbalances that form between supply and demand.
Shocks, such as the one we see on the oil market now, are not unusual. When producers form a cartel, as OPEC is, the price of the commodity is heavily influenced by the decision taken behind closed doors.
Investors take their clues on possible price levels from market news and technical analysis. But the main thing is that commodities now serve a double role for a trading account – they diversify the portfolio and protect it against turbulent times.