Trading Commodities & Strategy

Commodity prices are mainly driven by supply and demand. However, other factors can affect this balance, including geopolitical tensions, the stage of the economic cycle, currency fluctuations (especially the US dollar, which is the main commodity pricing currency), and production disruptions caused by weather. Commodity traders use futures contracts, options, and other financial instruments to profit from price swings or to reduce market risks. Commodity trading may prove very profitable if you can recognize and follow the long-term commodity cycles.

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A. Trading Commodities & Strategy

Commodity markets often move in cycles and usually have a high correlation with the US dollar but a low correlation with traditional assets like stocks and bonds. This makes them useful for portfolio diversification and protection against inflation. In addition, modern investment theories aim for a mix of portfolio positions to manage uncertainty, which makes commodities—especially gold—attractive for portfolios worldwide.

Commodity traders usually combine fundamental analysis with seasonal patterns and technical analysis to decide what and when to trade. Fundamentals indicate the market direction, while seasonal patterns and technical analysis help with timing entries and exits. Strict risk management is used to protect the main capital.

Table: Key Strategies for Trading Commodities

🔗 Find out more: » Trading Strategies for All Financial Markets

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B. Understanding and Trading Oil Price Swings

Historically, oil prices have moved within a wide range of 30 to 150 U.S. dollars per barrel. The use of leverage in derivative markets helps explain the sharp short-term swings in oil prices.

Fundamental Highlights

• More than 1 million WTI contracts are traded daily on CME Group, with over 4 million contracts open at any time. This creates significant price pressure that is mostly separate from the actual physical demand for oil.

• OECD oil consumption is falling by 1.2% per year, while Asia—especially India—is driving 75% of global demand growth (India’s demand is increasing by 500,000 barrels per day each year).

• Key oil producers in 2025 are OPEC+ with 43%, the USA with 13%, and Russia with 11% of global oil production. Saudi Aramco is the world’s top producer, with 9.7 million barrels per day—making up 9.7% of total oil production.

🔗 Basic Information About Oil Trading

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C. A Historical Look at Gold Prices and Their Significance

The total amount of gold available in the world today is about 156,000 tons. Each year, only 3,000 to 3,500 tons are mined. Most of this new supply goes to the jewelry industry, while the rest is used for investment. Since gold production is controlled and concentrated in a few countries, rising demand is often not matched by supply. Historically, gold was used as the world’s currency, and during financial crises, many investors view it as a “Safe Haven.” In such times, gold prices tend to rise sharply without any pauses or corrections. Investor psychology plays a key role in gold price movements, often outweighing the basic rules of supply and demand. In 2009, during the financial crisis, demand for gold dropped by 32%, yet prices still rose significantly.

Fundamental Highlights

• 208,000 metric tons of Gold is the total quantity that was ever mined (until 2024)
• Jewelry has used 95,000 tons, Central Banks 35,000 tons, Investment (bars, coins, etc.) 50,000 tons, and 30,000 went to manufacturing (electronics, space, etc.)
• Around 3,000–3,500 metric tons of Gold are mined per year (Top producing countries include China, Russia, Australia, Canada, and the U.S.)
• 25% of the new gold supply comes from recycling

An Overview of Historical Gold Price Rallies

For hundreds of years, the gold price remained stable under systems like the Gold Standard and Bretton Woods. However, after the 1970s, gold prices began to rise sharply due to high inflation and geopolitical tensions. These price movements reflect gold’s dual role as both a commodity and an investment safe haven. Thanks to detailed records kept by the United Kingdom, we can trace the price of gold year by year from 1257 until 1945, when the British Official Price ended. The chart below shows gold price movements in British Pounds per ounce. Note that in 1791, gold also began trading on the New York market.

Chart: The Price of Gold from 1257 to 1944 (British Official Price)

 🔗 Find out more: » Historical Price of Gold

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D. Commodity Trading Using Contracts for Difference (CFDs)

A Contract for Difference (CFD) is an ideal tool for trading commodities. CFDs offer low margin requirements and a wide range of options for commodity traders.

Keep in mind that CFDs are not standardized, so each broker sets their own terms and conditions.

📌 Tip: CFDs on Futures are often the best choice for commodity trading. They charge zero swap rates for holding positions overnight, making them ideal for swing trading. While CFDs on Futures have higher spreads than standard CFDs, holding positions for more than 2–3 days makes them very cost-effective.

Comparing CFD Brokers for Commodity Trading 

The table below compares CFD brokers suitable for trading Gold, Oil, and agricultural commodities.

Table: Compare popular commodity brokers:

CFD BROKER / FEATURES
□ COMMODITY ASSET INDEX	SOFT COMMODITIES 100 ETFs on soft commodities ENERGIES BRENT, WTI, and Natural gas PRECIOUS METALS XAUUSD XAGUSD ETFs (20 ETFs on platinum, palladium, copper or nickel)	SOFT COMMODITIES Corn, soybeans, sugar, cocoa, coffee, and wheat as CFDs Leverage up to 1:10 ENERGIES BRENT, WTI, and Crude Oil Futures GOLD PAIRS Gold against USD, Euro, GBP, JPY, AUD, and CHF	SOFT COMMODITIES Cocoa, CoffArabica, CoffRobusta, Corn, Cotton, Soybean, Sugar, and Wheat ENERGIES BRENT, WTI, and Natural gas Heating Oil PRECIOUS METALS Gold (XAU), Silver (XAG), Platinum (XPT), and Palladium (XPD)
□ PLATFORMS	MT4/MT5 RStocks Trader	MT4/MT5 Ctrader	MT4/MT5
□ ACCOUNT INFO	Min. Deposit: 200 USD Cards | Bank Wire | Skrill PerfectMoney | Neteller » Review RoboForex	Min. Deposit: 200 USD Credit Cards | Bank Wire Skrill | PayPal | Neteller » Review IC Trading	Min. Deposit: 200 USD Credit Cards | Bank Wire Skrill | UnionPay | Neteller » TitanFx Review
□ WEBSITE	» RoboForex Website	» IC Trading Website	» TitanFx Accounts

 

 

■ Introduction to Commodity Trading

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