Commodity market overview
Let’s start by answering the question on every trader's lips: “Is now a good time to invest in commodities?”
It is important to know when to invest in commodities, and now is the perfect time to buy carefully in preparation for forecasted gains. Buy the right commodities and you will be set to make money when values are boosted by investors seeking refuge from the bonds bubble and the predicted stock market depression.
The commodity market outlook for fall is one of security and potential. Prices are leveling off after big gains in the summer, letting new traders find their feet in time for further predicted gains in the future.
Look below for tips on where and how to invest in commodities in fall 2019, including our top five picks.
Should I invest in commodities?
Commodities can be said to provide the most all-round strategic and predictable trading and investment opportunities, but also the most rewarding when done right.
You can generally let your money lie in certain slow and steady stocks and bonds that provide reliable dividend and yield-based returns. This isn’t possible in the commodities market. What is more possible is strategic, knowledge-based trading. So, the answer is “yes”. If you know the factors that influence the market, high returns can become much more predictable.
Factors influencing the commodity market today
The U.S.-China trade war
Trump’s trade war is all-out bad news for the trade-dependent commodity market, right?
Wrong. Trade tariffs create demand for commodities that can’t be imported cheaply while cutting off export markets for others, so it is a mixed bag of pros and cons.
Now, the tariffs have driven down some commodity prices, such as those of cotton and oil, there is the opportunity to invest while they are cheap and reap the rewards. Trans-Pacific trade talks are imminent, so now could be the time to do this. More on this in our top five commodities section below.
Across the markets, investors and traders generally want the same thing and are willing to look anywhere to get it. Put simply, that means that when one market booms, the other is more likely to be depressed. It’s much more complicated than that, but mid-year uncertainties around the stock market boosted the commodities market. This was mainly because worried stock investors looked to precious metals to secure their investment. As further stock-market drops are predicted, this looks set to happen again.
Why is gold so valuable? It is no longer because it looks pretty or because putting it in a vault is a good way to secure your wealth. Today, most of the gains made by gold and other precious metals are down to the tech industry’s demand for them.
Low emissions autos, electric cars, mobile phones, laptops, satellites and almost anything high-tech you can think of depend on these metals, which are beginning to run very low. For commodities traders, this means sure-fire rallies and there is some advice on how to benefit from them below.
Top 5 commodities to invest in during fall 2019
If all this talk of gains has got you interested in trading, we have a few tips on the best performing commodities this fall.
Even though the market gains of gold and silver seem to be rather impressive this year, many investors and traders are looking for a diversification tool to move away from these metal majors. In this scenario, the question on many lips is ‘What is the best metal to invest in 2019?’
So far, the answer continues to be Rhodium. This once unknown metal has made headlines by doubling in value over the year from $2,500 per oz to above $5,000. Those in the industry say demand and value can only increase.
According to Peter Hug, global trading director at Kitco Metals, “From a technical perspective, once rhodium broke above $3,700, there are no chart lines until $10,000,”. That means another potential doubling in value.
Another way to add some sparkle to your portfolio. Anyone familiar with big-selling records will know platinum is worth more than gold. Except that it is not at the moment and the only reason why is a short-sighted one. Platinum’s main use is in catalytic converters, especially for diesel cars. Since it was revealed that diesel polluted more than previously thought, production has plummeted. But now, it seems that diesel may be cleaner than petrol after all, as long as the cars have bigger catalytic converters with even more platinum in them.
Trade Platinum Spot CFD
Furthermore, electric cars require a lot of platinum, as do many modern electric trains, trams and other booming electric technologies. This is expected to drive the price of platinum back above gold over the next three to five years. Making platinum one of the top-performing commodities in the long-term future
Everyone looking to invest in commodities in fall 2019 is eyeing cotton expectantly. It has been on a long downtrend that is expected to reverse. Demand for it among China’s booming middle class is skyrocketing with U.S.-focussed tariffs not depressing trade so far, as previously expected. With trans-Pacific trade talks beginning soon, these tariffs may be lifted, boosting prices toward earlier highs.
Even if this does not happen, poor environmental conditions in some of the main growth areas are resulting in poor crops this year, pushing up prices. Experts predict a rally to $76 per lb from $58 by the end of this quarter.
With prices almost as volatile as the liquid itself, crude oil is always a good route to quick returns if traded wisely.
Now it is on the rebound from a strong six-month support level. Although it’s early in the day, it is always worth buying a commodity moving upward from a strong support-level, which protects from major losses.
Besides, low supplies could push oil prices even higher as OPEC producers are cutting output and there are hints that West Texas pumping may be slowing down.
The weak U.S. economic data released recently could be a problem, but if this hiccup remains small, the future looks bright for black gold.
Rubber has declined from a mid-year high since July. However, the drop ceased for a time in mid-August and, although there has been a further fall recently, many have predicted a period of leveling off to be followed by a rise to around 180 JPY/kg by the end of the quarter; a substantial increase on today’s 159 JPY/kg. After that, things look less certain, as more event-focused forecasters predict a leveling off in the ever-important commodity’s value.
Investing indirectly in commodities
As well as investing in the commodities themselves, it is possible to invest in the stocks of companies that explore, mine, produce and benefit from them. This allows you to increase your earnings while spreading and, therefore, reducing the risk.
Importantly, it also means you will receive dividends, another source of income more reliable than asset appreciation. Finally, it allows you to strategically target small areas of a commodity industry, such as producers of platinum specifically for electric cars, which look likely to have a bright future.
How to invest in commodities CFDs
Now you know what commodities to invest in to make the most of the volatility and expectation in fall 2019, it’s worth learning how to do it.
One of the easiest ways to trade commodities is through contracts for difference, or CFDs. You can do so through platforms like those offered for web and mobile by Capital.com.
This is done by opening a contract at a price based on the cost of the underlying commodity. You then gain or lose money as the commodity changes in value by simply speculating on its price direction: if you think the price will rise, you ‘Buy’; if you think the price will fall, you ‘Sell’. It allows you to go short or long on the asset, providing easier execution and greater liquidity.
A CFD allows you to trade on margin, ensuring a greater exposure to global markets. However, since CFDs trading is leveraged, both gains and losses are magnified.
To learn more about CFD trading, check out free online guides provided by Capital.com and come back for more commodity market news in the future.