How to choose commodities? An article explaining the most worthwhile varieties to invest in

There are many opportunities in the commodities market, but not all varieties are suitable for you. Today, let’s analyze how to find truly worthwhile commodities to invest in from among so many options.

First, clarify which commodities are worth investing in?

The commodities market is diverse, including energy, metals, agricultural products, and livestock. However, from an investment perspective, not every type is a good choice.

For example, electricity futures sound in high demand, but due to transportation limitations and regional price constraints, they become less attractive for retail investors. So, what kinds of commodities are worth betting on?

Liquidity must be substantial—there should be enough traders in the market so that prices are well-formed and unlikely to be manipulated. Crude oil, copper, gold, and soybeans meet this criterion.

Prices should be unified globally—the same commodity is traded in New York, London, Shanghai, and other markets, with prices aligned across regions. Crude oil and gold are typical examples; you don’t need to worry about large regional price differences.

Easy to store and circulate—metals and grains are durable and unaffected by seasons or regions. In contrast, some perishable or difficult-to-transport commodities are less suitable.

Quality must be standardized—gold produced anywhere has the same purity; crude oil also adheres to uniform quality standards. This prevents disputes over quality during transactions.

Demand should be stable and widespread—oil and natural gas are used worldwide daily; wheat and soybeans are also essential global staples. This ensures deep, long-term trading.

Basic information should be easily accessible—only when supply, demand, and macro policies are transparent can you judge price trends based on economic logic rather than guesswork.

Based on these standards, nine major varieties are most worth attention: crude oil, copper, aluminum, gold, silver, soybeans, corn, sugar, and cotton.

What exactly are commodities?

Simply put, commodities are bulk materials that circulate widely, are non-retail, possess commodity attributes, and are used in industrial production and consumption. The key feature is “large”—large supply, demand, circulation, and inventory, usually positioned upstream in the industry chain.

Energy includes crude oil, gasoline, fuel oil, natural gas, and electricity. Among these, crude oil is undoubtedly the king, with huge supply and demand, covering downstream applications like packaging plastics, PTA-made clothing, PVC flooring and pipes, and gasoline for vehicles. Without crude oil, modern life cannot operate smoothly.

Industrial metals include copper, aluminum, lead, zinc, and iron ore, which are the lifeblood of manufacturing.

Precious metals include gold, silver, palladium, and platinum. They are “precious” compared to ordinary metals, with much higher prices per unit weight, and are almost non-corrosive and non-degrading, making them ideal for long-term reserves, value preservation, and hedging.

Agricultural products mainly refer to widely cultivated grains like soybeans, corn, and wheat.

Soft commodities refer to products like sugar, cotton, and coffee.

Livestock products include pork, beef, and others.

There is also a special category called the shipping index, because global bulk commodities mainly rely on maritime transport, so fluctuations in the shipping index can also reflect the prosperity of the commodity market.

How to invest in commodities?

For retail investors, directly trading spot commodities or investing in mines is impractical. The feasible approach is through derivatives, mainly commodity futures and options.

Commodity futures are the easiest to get started with. Each futures contract corresponds to a specific commodity, for example, crude oil futures target crude oil. But you also need to understand when the contract expires, as futures prices are based on the expected spot price of that commodity in a future month. You need to predict what the spot price will be at that time to decide whether to buy or sell.

To succeed in futures trading, fundamental analysis is essential. Fundamentals involve studying macroeconomics, supply and demand factors, and how they influence future prices. Fundamentals determine the overall direction and magnitude of price movements.

However, looking at fundamentals alone is not enough. You also need to combine technical analysis—using candlestick charts, moving averages, volume, and other indicators to find entry and exit points. Fundamentals tell you “what to buy,” while technicals tell you “when to buy.” Combining both can improve success rates and risk control.

How to grasp the timing of investment?

Because commodities are globally priced, the best investment opportunities often occur when major economies are in similar phases of their economic cycles. For example, after the 2020 pandemic, global central banks flooded the markets with liquidity and implemented quantitative easing, leading to a “money surplus” and inflation. During this period, commodities experienced a significant rally.

Final advice

Commodities, stocks, bonds, and forex are the four main asset classes, and their price fluctuations directly reflect economic conditions, with good liquidity. Participating in commodities investment essentially involves re-pricing the global industrial chain.

The true approach is: use fundamentals to guide the overall direction, use technical analysis for precise entry and exit, and focus on varieties with good liquidity, global pricing, and driven by supply-demand and macro factors. The nine recommended varieties—crude oil, copper, aluminum, gold, silver, soybeans, corn, sugar, and cotton—are all actively traded, globally priced, and relatively easy to analyze as high-quality options.