Current commodity prices & how to trade them

Commodity prices are rarely quoted in units typical for Europe. For example, gold is traded in troy ounces (1 troy ounce = 31.1034807 grams; 1 kilogram = 32.15 troy ounces), wheat in bushels (1 bushel of wheat = 27.216 kg), oil in barrels (1 bbl = about 159 litres), coffee in pounds (1 pound = 0.454 kg), etc. We display prices in the usual market units as well as in units commonly used in Europe.

Energy commodity prices

Precious and other metals prices

Agricultural commodity prices

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How to trade commodities

Nowadays you do not need to buy thousands of sacks of grain to profit or lose from price changes. You can trade contracts for difference, known as CFDs (Contract for Difference). Trading this way has several advantages:

1. You can profit even when the commodity price falls; see the example below.
2. You do not own the commodity; you aim to profit from price movements. You do not have to store, transport or find buyers, and you avoid the risk of spoilage (wheat, corn, cocoa, coffee, etc.).
3. High liquidity – buying or selling is a matter of a few clicks in your broker’s platform and your order is executed immediately.
4. You can use leverage to magnify your gains/losses from trading; see the example below.

Alongside the benefits, CFD trading carries the risk of losing your entire investment, which is also true of direct purchases. Brokers are compensated via the spread (the difference between the buy and sell price), which you should factor in.

Example: trading oil

This trading example is based on the values shown in the image on the left; leverage and price may change over time.

Say you buy a CFD on oil equal to 20 barrels (1 barrel = 158.98 litres; 20 barrels = 3,179.6 litres). Without leverage, 20 barrels would cost you 1,306 USD (about £950). With leverage set at 1:10, you need only one-tenth of the notional value to open the trade, in this case 130.60 USD.

Your broker effectively lends you the rest. They can do this because day-to-day price moves in commodities typically are not large enough to put the broker at risk –> your potential loss is covered by the margin you post for the trade.

If you buy 20 barrels at 65.3 USD per barrel (total notional purchase value 1,306 USD) and later sell at 70 (total notional sale value 1,400 USD), your profit is: sale price − purchase price = 1,400 − 1,306 = 94 USD. The reverse also applies and you can lose in the same way.

At XTB, you cannot lose more than your initial deposit on the trade (negative balance protection for retail clients), which here was only 130.6 USD. In such a case, your position would be closed automatically earlier.

Besides the difference between buy and sell prices, you also pay an overnight financing charge for holding positions. In some cases, the broker pays you to hold the position. For example, on oil the “Overnight financing” rate at the time was −0.0222% for long positions and −0.0216% for short positions.

Even after reading this example, things may still be unclear. The simplest next step is to open a demo * account and try trading for free. Opening a demo account takes about half a minute.* 71% of retail investor accounts lose money when trading CFDs with this provider.

What is a commodity?

A commodity is a good that is sold on exchanges in a standardised quality. These are products we commonly use or consume and that have economic significance. Examples include oil, corn, and coffee. Below we look at commodities by type.

Types of commodities

Commodities are usually grouped by use or how they are sourced. We distinguish between energy, precious and industrial metals, known as “hard commodities”, which are typically mined. Then there are agricultural products and livestock, known as “soft commodities”, which are grown or raised.

Energy

This group powers the modern world: natural gas, oil or propane. Although it might seem indispensable and therefore only rising in price, energy prices can be volatile, offering many trading opportunities. For example, the price per barrel of oil fell by roughly a third from the start of one year to later that same year.

Precious and industrial metals

Humanity has known precious metals for a long time; early money was made from them. Since moving to paper money, precious metals have been seen as a store of value. Their prices often rise in times of economic stress as capital moves into them from assets such as equities. Gold and silver are typical examples.

Industrial metals form the second category. They are used to produce other goods and have a primarily economic role. Examples include copper and aluminium.

Agricultural products

Agricultural products are typically grown for consumption and are mostly raw materials for food production. Examples include oats, corn and soy. A notable exception is cotton, used in apparel.

These prices follow agricultural cycles (the seasons) and vary with the year’s harvest. If a commodity is overly abundant (a bumper crop), prices tend to fall; shortages usually push prices up.

Meat and livestock

Global trends show rising meat consumption, with demand increasing over many years. Standardised commodities here include, for example, frozen pork bellies or calves.

How commodities are traded

Investors access commodities via commodity exchanges. Suppliers (such as farmers or miners) meet there and provide supply; buyers provide demand. Alongside them are investors and speculators who do not need the physical commodity (say, soy) and instead trade its price moves. Derivatives, especially CFDs, are commonly used for speculation.

Commodity exchanges operate similarly to stock exchanges: they open during set hours on business days and enforce trading rules. One key rule involves contract sizes. Because markets trade in size, you typically cannot buy just one barrel of oil or one gram of gold per contract. Metals are quoted in ounces; oil is traded in lots of thousands of barrels.

The 5 most-traded commodities worldwide

Oil

Oil dominates commodity rankings as the most traded commodity globally. Oil is a major fuel source for transport and heating, and a key input for plastics and chemicals. Oil prices and availability influence the world economy and geopolitics. Roughly 400,000 contracts are traded per year on average. One contract is 1,000 barrels of oil (one barrel is about 159 litres).

As with other commodities, traded volume is counted in contracts, otherwise comparing volumes (ounces vs barrels) would be impractical.

Gold

Gold is a traditional investment. It is often described as a hedging asset that can help against inflation. It has a relatively stable value and has historically been a safe haven in periods of uncertainty. It is also used in electronics and jewellery. Around 150,000 gold contracts typically trade per year. One contract is 100 troy ounces (one troy ounce is 31.1 grams).

Natural gas

Natural gas is increasingly used as an alternative to coal or oil. It is used for energy, industrial processes and electricity generation. Its availability, like oil’s, directly affects global industry. Annual volume is about 100,000 contracts, each representing 10,000 MMBtu (million British thermal units), the exchange unit for gas.

Soya

Soya is one of the world’s key crops, influencing both the food industry and agriculture. Soya beans are an important protein source for people and animal feed. Soya oil is widely used in food production, cosmetics and biofuels. About 100,000 soya contracts trade per year. One contract is 5,000 bushels (one bushel is about 25 kg).

Corn (maize)

Corn is a staple food for people and animals worldwide. It is also used to make biofuels and other food products. In a typical year, around 90,000 corn contracts trade. As with soya, one contract is 5,000 bushels, and one bushel is about 25 kg.

Trading with derivatives – speculation

One way to trade commodities is through derivatives, which are not direct purchases or sales of the underlying itself. Derivatives derive their price from the real-world product traded on exchanges. CFDs (Contracts for Difference) are commonly used. An investor can speculate on both rising and falling prices without owning the commodity. Many online brokers (comparison) support CFDs today.

Trading with futures contracts

Commodities are also traded via futures contracts. Simply put, this is an agreement between a supplier and a buyer on the commodity, quantity and price. When the contract expires, they settle by delivering and receiving the agreed goods.

This creates room for trading and speculation because these contracts can be freely traded on exchanges before expiry. If it suits a trader, they can sell a contract before expiration and buy another.

What drives commodity prices?

Commodity cycles

Commodities follow certain global cycles. This is most visible in agricultural products. If you trade wheat or soya, it is important to know the current year’s harvest outlook. A global shortfall logically points to higher prices; oversupply to lower prices. This describes full-year trends.

Within a single year, the biggest changes tend to be between winter and summer, reflecting the harvest and the winter period. Appearances can mislead, though. Five-year data for wheat futures show that January (2016–2020) was consistently the lowest price month of the year. Trading activity generally slows towards year-end and, after Christmas, picks up again slowly in January. Paradoxically, at least in recent years, wheat prices tended to fall in winter.

These cycles do not apply as clearly to precious metals, which are mined year-round regardless of harvests. Human factors can matter, however. If gold‑producing countries struggled to find workers (unusual, but possible), prices could rise. Conversely, a new deposit capable of large output could push prices down. Political instability or conflict around mines, as seen historically in parts of Africa, are similar “human” factors.

Commodities during crises

Like equities and other assets, some commodities are affected by economic cycles. The basic rule still applies: higher demand pushes prices up; weak demand pushes them down. When the economy does well, consumption rises and people spend more, buying more goods that directly or indirectly involve commodities such as oil or wheat. Precious metals differ: gold, for example, is widely seen as a commodity that rises during crises. A case in point was 2020: gold dipped briefly but rose steadily from spring. Gold is considered a hedge against inflation and adverse swings in equity markets.

Commodity indices

As with equities, commodities have indices: baskets of selected commodities traded together. This offers a clear benefit to investors: simpler exposure and diversification, spreading risk across many types from different areas. For example, you might hold Brent oil and natural gas alongside gold and silver.

One such index is the S&P GSCI. Formerly the Goldman Sachs Commodity Index (hence the acronym), it is a diversified composite of futures contracts across the commodity spectrum. It comprises 24 commodities, covering energy, industrial metals, agricultural and livestock products, and precious metals.

Why trade commodities?

Commodities are popular partly because they can hold up during turbulent periods in equity markets. That does not mean they are free of ups and downs, but swings can be more moderate. The first advantage is relative stability and, based on the factors above, a degree of predictability.

They also diversify an investment portfolio. One of the basic rules is not to put all your eggs in one basket. Allocating part of your capital to commodities helps meet that goal.

Commodities can also help protect against inflation. This is well known for precious metals: buying gold is often suggested as a way to mitigate inflation, which erodes savings over time. Inflation tends to push commodity prices up, as visible in everyday products like bread or flour, which typically become more expensive over the years.

If you have contracts locked in for a future period, rising prices can work in your favour. Early purchases for coming months or years can also hedge against a fall in the US dollar (or another currency). Markets are unpredictable, and as noted above, some commodities fall during the year. At such times, it may be sensible to enter new contracts at lower current prices to offset potential losses.

For trading commodity CFDs, we recommend the XTB broker 71% of retail investor accounts lose money when trading CFDs with this provider..