Comprehensive Guide to Commodity Investment: How to Profit from Globally Priced Assets?

Why Are Commodities Worth Your Attention?

In modern investment portfolios, commodities stand alongside stocks, bonds, and foreign exchange, yet they are often overlooked by many investors. Why are these assets so important? Because they are deeply linked to the global economy’s health, inflation cycles, and even every aspect of daily life.

An interesting phenomenon is that when central banks implement quantitative easing policies (such as during the 2020 pandemic), the situation of “more money than goods” tends to push commodities into a broad rally. This reflects the sensitive response of commodity prices to macroeconomic conditions. In other words, participating in commodity investment essentially involves re-pricing the global industrial chain.

What Types of Commodities Are Included?

The term “commodities” refers to large quantities of physical goods that enter circulation but are not sold at retail, possess commodity characteristics, and are widely used in industrial production and consumption. Their common feature is “large” — supply, demand, circulation, and inventories are all substantial, often placing them upstream in the industry chain.

According to market practice, commodities are mainly divided into six categories:

Energy Sector includes crude oil, gasoline, fuel oil, natural gas, and electricity. Among these, crude oil is the most liquid and actively traded, as its downstream products permeate all aspects of life—plastics for food packaging, PTA for textiles, PVC for flooring and pipes, gasoline for transportation. Crude oil is often called the king of commodities.

Industrial Metals include copper, aluminum, lead, zinc, and iron ore, with demand closely related to the global manufacturing sector’s prosperity.

Precious Metals consist of gold, silver, palladium, and platinum. The main difference from industrial metals is their “precious” nature—unit prices are several times higher, and they are almost non-corrosive, making them suitable for currency reserves and hedging.

Agricultural Products include widely cultivated grains such as soybeans, corn, and wheat.

Soft Commodities include sugar, cotton, coffee, and others.

Livestock covers pork, beef, and similar products.

Additionally, due to the large volume of maritime circulation, shipping indices are also considered a special type of commodity.

Which Commodities Should Investors Choose?

Not all commodities are suitable for investment. Although supply and demand are large, some are less ideal due to restrictions related to time, region, etc. For example, electricity has huge supply and demand but is limited by transmission scope and regional pricing, making it less attractive to most investors.

So, what kinds of commodities have investment value?

Liquidity is the primary criterion. The commodity must attract significant capital participation, enabling the market to form proper pricing and nearly eliminating manipulation risks. Crude oil, copper, gold, soybeans, and corn all meet this standard.

A global centralized pricing mechanism is also crucial. If a commodity is traded on multiple exchanges worldwide, traders can participate based on a unified global market price, greatly enhancing convenience.

Ease of storage and transportation is equally important. Metals and grains are less affected by regional or climatic factors, making them suitable for long-term holding.

Standardized quality is also necessary. Whether produced anywhere, gold remains gold, crude oil remains crude oil, with unified quality control and recognition standards, preventing quality discrepancies.

Demand stability and broadness ensure the feasibility of long-term investment. Energy commodities have long-term global demand, and food commodities are fundamental to daily life.

Ease of access to fundamental information helps investors avoid blind decisions based solely on technical analysis. When you can easily obtain economic logic-based judgment criteria, your investment success rate naturally improves.

Considering all these factors, crude oil, copper, aluminum, gold, silver, soybeans, corn, sugar, and cotton are key commodities worth focusing on.

Specific Paths to Participate in Commodity Investment

There are various ways to invest in commodities, including physical investment (such as spot trading, mining investments, logistics deployment) and derivatives trading. For beginners, derivatives—especially commodity futures and options—are the easiest to get started with.

Each futures contract has a clear underlying asset, for example, crude oil futures correspond to crude oil. After identifying the underlying, investors need to understand the contract’s expiration date. Futures prices essentially price the spot price for a future month, so traders must predict the approximate spot price at that time and base their investment decisions on that.

To effectively participate in futures trading, two analytical dimensions must be mastered:

Fundamental analysis focuses on macroeconomic environment, industry supply and demand changes. These factors determine the future price movement direction and magnitude.

Technical analysis uses charts, indicators, and other tools to forecast short-term trends. But both should not be neglected—fundamentals need technical confirmation to accurately identify entry and exit points; technical analysis also requires fundamental insights to judge trend sustainability and magnitude. Combining both forms a complete investment decision framework.

Final Thoughts

Commodities are a major asset class alongside stocks and bonds but are often underestimated due to their complexity. In reality, as long as you master the correct selection criteria and analysis methods, ordinary investors can benefit from them.

The future investment approach involves: combining fundamental and technical analysis, focusing on liquidity, global pricing, and fundamental-driven mainstream futures commodities. Paying close attention to high-quality commodities like crude oil, copper, aluminum, gold, silver, soybeans, corn, sugar, and cotton is the right way to participate in commodity investment.