The online commodity market is a centralized marketplace where commodities like oil, grains, and metals are traded. It involves a commodity exchange that functions similarly to a stock exchange and comes in handy in case traders want to make investments that can help reduce the impact of being affected by the market volatility. To brush up your basics of the commodity market and to know more about what are the types of commodities traded in this market, read on to know more.
What are the Most Traded Commodities?
Online commodity trading takes place with the intention of making profits and diversifying the ways of gaining profits. Trading takes place through spot markets and commodity exchanges that bring together the traders.In India, the major commodity exchanges are:
- Multi Commodity Exchange (MCX)- Metals, Gold and energy
- National Commodity and Derivatives Exchange (NCDEX)-Agriculture commodities
Commodity bullion consists of gold and silver and are alternatively known as precious metals due to their scarce availability and has been historically used as a currency. They are traded in the MCX and are considered as a safe investment during inflation. Since they are considered legal tender by central banks, they are stored in reserves and are used as a de facto money.
In the bullion market, gold is traded in the following forms:
- Gold mini
- Gold petal
- Gold guinea
Meanwhile silver is traded as follows:
- Silver Mini
- Silver Micro
Commodity trading in india in the energy market i.e., crude oil and natural gas help India meet half of its energy requirements. Although crude oil is highly dense, it is available only in limited quantities and can be transported using ships and pipelines. It is also used to extract energy resources like kerosene, petrol, and diesel. Natural gas is one of the cleanest sources of energy, thanks to low emissions. It is odorless, colorless and highly flammable, and is a type of fossil fuel used in cooking and generating electricity. It is an extract of petroleum and is usually found above crude oil.
The history of base metals dates back to 6000 BC and are widely used in industrial and commercial applications like manufacturing and construction. Compared to gold and silver, they are widely available and are easier to mine. In India, the MCX recognizes the following as base metals:
Agricultural commodities are more volatile i.e., subjected to more and frequent changes in prices. This can directly affect the participants in the food chain, right from the farmers who cultivate to the final consumers who consume them on a daily basis. They are classified as a soft commodity as their prices are affected by multiple factors like supply, demand, and storage. The agricultural commodities in the MCX are:
- Black Pepper
- Crude Palm Oil
- Mentha Oil
Online commodity trading is an apt choice for traders who want to disperse the risk of inflation. Although it has the potential to give high returns, it is important to know that it functions differently compared to a stock market, so the factors affecting the price changes will vary. You can now download an online commodity trading easily and diversify your investment portfolio.