What are the Best Commodities to Invest in

While commodities aren’t generally as popular among investors as stocks or international currencies, this continues to underpin a relatively high volume of trades.

At the same time, the global commodity services market is projected to peak at a value of $5.05 trillion by 2026, which reflects the fact that commodities cover a broad range of raw materials and assets.

Commodities also represent an attractive investment option for those who are looking to hold monetary value or effectively increase their income. But what are the best commodities to invest in the current climate?

What are commodities?

Let’s start by defining commodities, which describe essential goods used in commerce that are interchangeable with other items of the same type.

Rather than being finished goods or products, commodities are usually inputs or raw materials used to help create other goods and services. Common commodity examples include wheat, oil and gold, with the quality and quantity of such items typically uniform across all producers despite slight fluctuations.

This description sets commodities apart from stocks and other asset classes, although they can still be bought and sold directly through spot markets or derivative alternatives like futures and options.

The process of owning and trading commodities also serves as a hedge against inflation, making it a particularly popular and appealing option in an economic climate where the cost of living remains disproportionate to earnings.

A look at the best commodities

The question that remains, of course, is what commodities are the most capable of delivering returns and hedging against inflation in 2023? Here are some options to keep in mind:

  1. Precious metals: Gold is the ultimate precious metal and arguably the most effective hedge against inflation, as its value is known to increase during times of economic contraction and austerity. Gold also provides a secure store of wealth, which can appreciate steadily in value over time. Other metals like silver are a little more industrial nature, and therefore more likely to be affected by supply, demand and periods of recession.

  1. Crude oil: Oil is one of the more volatile commodities, due to fluctuating levels of demand and the caps placed on supply. OPEC often looks to regulate supply in line with demand, in order to retain viable price points. While recent disruptions have increased the price of oil due to a shortage of supply in the wake of the war in Ukraine, this creates an opportunity for speculative investors to profit in 2023.

  1. Base materials: There are also less precious but affordable more materials like copper, aluminium and copper. Such commodities are valuable in large quantities, while they tend to hold their value well in the market and are ideal investments during the type of economic volatility seen in 2023. There’s also a crossover between these commodities and the companies that mine and produce them, which can be traded as equities to help diversify your portfolio.

So, there you have it; our brief guide to commodities and the assets you should consider trading in 2023. Remember, the key is to maintain a diversified account at all times, while constantly reviewing your asset allocation to minimise risk and optimise returns.