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This educational resource, pertaining to trading and investing, is a continual work in progress and intended for users who are interested in self-educating themselves, there are no fees or classes. For those interested in learning more about the website’s tools, the wiki will be more insightful. As a disclaimer, nothing here is financial advice, and the examples provided are incidental.
Table of Contents:
- Introduction to Commodities
- List of Commodities
- Introduction to Energy
- Introduction to Metals
- Food and Related Commodities
This article is intended to be an expansion of the commodities section in the Starter Guide to Investing
1. Introduction to Commodities
Commodities are real world physical assets, things like gold, wheat, lumber, oil and more. There are a variety of different ways to gain exposure to these, be it through holding ETFs, trading commodity futures, or holding stocks of companies dedicated to extracting these assets. You can also opt to physically hold commodities, though practically speaking, this only applies to precious metals. Each of these topics will be discussed in this article, with the exception of futures, as that requires its own article. For those interested, a list of traded commodities will be provided below though only the largest commodities will be covered, as those are the ones easily available to average investors, the rest are mostly accessible through the Chicago Mercantile Exchange (CME) and the New York Mercantile Exchange (NYMEX). Not every brokerage provides access to each commodity and getting a brokerage license to trade on those platforms directly is rather difficult.
2. List of Commodities
For a complete list of commodities visit the site below. Other futures markets are also listed there.
https://futures.tradingcharts.com/marketquotes/ZK.html
Just about every brokerage provides access to commodities in ETF form, Webull is a good brokerage for those interested in trading futures contracts on commodities.
For those that want just a general exposure to commodities and natural resources: GUNR
3. Introduction to Energy
Oil
By far the largest and most traded commodity, oil is the black gold of the world economy. There are endless amounts of applications for oil; making transportation and distribution possible, petrochemicals, fertilizers, heating, plastics, the list really is endless. If you still aren’t convinced that oil is the most essential commodity, consider that without it, tractors would not work the fields, seeds would not grow without fertilizers, plastics would not keep the food shelf stable, trucks would not deliver the food to stores, and you would not be able to drive and pick up your groceries. Add the myriad of other uses for oil and you’ll see there’s a reason wars have been fought for it. That said, oil is controlled by a select few nations fortunate enough to have access to it and governments without direct access typically conspire to keep the price of oil low. Cheap energy is generally correlated with good economic times and the opposite is also true; the Energy Crisis of the 1980s and the Great Recession of 2008 both featured periods of increased energy costs that thwarted economic recovery. There are plenty of different ways to invest in oil, from producers, refiners, distributors, and a mixture of all of the above.
For those interested in exposure to ETFs tracking the price of oil and related fuels: USO, XOP, OIH, PSCE
For the price of Crude Oil (unrefined) in particular: UCO
There are a wide variety of leveraged ETFs dedicated to the oil market and various producers, examples include: GUSH, NRGD, WTIU
There is also a huge amount of different companies working the oil market, some of the largest include: XOM, CVX, SHEL, TTE, COP, ENB, SO, BP, DUK, PBR, WMB, EPD, CNQ, SLB, KMI, EQNR
Natural Gas
The natural gas market is smaller than oil, but NG is essential to the world. The most common uses for it are heating, cooking, electrical generation (43% of the US power grid was supplied by it in 2023) and recently attempts to use it as a fuel. Due to it not being the basic building block of civilization like oil is, there are fewer ways to invest, but they do exist.
Straightforward ETF: UNG
The most common leveraged NG ETFs: BOIL, KOLD
There is an extremely strong overlap between oil and NG producers, as they typically occur in the same places, many of the companies listed in the above section also produce NG.
Coal
Coal gets a bad wrap and has been phased out in many parts of the world, but the truth is that its still extremely important. The key use of coal is in power generation, which many countries without access to cheap oil and gas still use to this day. Even in the United States, just under 20% of the power supplied to the electrical grid was done thanks to coal. Using coal as a heat source is prevalent in many less developed countries around the world, but even Europe has seen a return to coal after gas supply from Russia was cut off as a result of the War in Ukraine. It’s a fairly seasonal commodity that hasn’t seen too much growth in recent years, but nasty winters see the price spike.
There’s only one ETF dedicated to coal: COAL
There aren’t too many publicly traded companies engaged in coal, as most coal is extracted and used in countries like India and China: BTU, AMR, BHP, CNR, HCC, NC, NRP
Uranium
Uranium has recently seen renewed interest thanks to a huge increase in demand in electricity for powering data centers and developing AI projects. It has a simple use case, primarily in nuclear power plants to generate tons of relatively clean electricity. So long as demand for power continues to grow and power plant meltdowns don’t scare people away again, its a fairly well positioned mineral. Keep in mind that it takes years for nuclear power plants to become operational. You can choose to invest in uranium miners or companies focused on exploiting it.
Straightforward ETF: URA
For an ETF dedicated to tracking uranium miners: URNM, URNJ
Some of the largest uranium miners: BHP, CCJ, DNN, NXE, UEC
Nuclear power focused companies: CEG, BWXT, VST, SO, EXC
Ethanol
Ethanol is one of the smallest energy fuels out there and does not have its own ETF. Originally schemed as a renewable resource fuel, which largely used corn and a ton of non-renewable energy sources to produce, it has become largely dependent on government subsidies to exist and many companies engaged in it have since closed their doors. There are a few companies still engaged in its production, but until some breakthrough in efficiency is made, it is unlikely ethanol will ever approach the heights of oil.
Companies engaged in ethanol production: BFRE, VSE, ANDE, PEIX, ADM, GPRE, AVRW, REX, SKTL
4. Introduction to Metals
Gold
Gold, in terms of size, is the oil of metals. Gold has plenty of industrial uses, ranging from electronics, aerospace, medicine and jewelry. About half of the gold mined every year becomes jewelry and the status associated with gold has continued for thousands of years. Gold bullion is also popular among those seeking to protect themselves from the fluctuations of global crises and inflation, as it has managed to retain its value well over the course of centuries.
Straightforward ETF: GLD
ETF tracking gold miners: GDX
Leveraged gold ETFs of different sorts: JNUG, GDXU, NUGT, UGL
Largest gold mining companies: AEM, NEM, WPM, FNV, GFI, KGC, FNLPF, AGI, RGLD
Silver
Silver is the most conductive metal on earth and as such has seen huge interest from the industrial sector. Electronics, medicine, chemical production, a recent boom in solar panels, and is even needed in nuclear power plants. To a lesser extent than gold, jewelry as well. Similarly to gold, silver bullion is also seen as a hedge against inflation and, thanks to being substantially cheaper than gold, it is much more accessible to the average person.
Straightforward ETF: SLV
ETF tracking silver miners: SIL
Leveraged silver ETFs of different sorts: SILJ, AGQ
Largest silver mining companies: FNLPF, PAAS, WPM, FSM, BVN, HL, CDE
There is usually an overlap between silver, gold, and other minerals, as silver is usually found and mined alongside other minerals. It is fairly rare to find a pure, size able, silver deposit.
Platinum
One of the rarest critical metals on earth, platinum has a very limited geographical distribution. It is mostly used in catalytic converters for the automobile industry, but also electronics, medicine, and jewelry. The rarity of the metal has seen it become an investment on its own and between 1972-2008, it traded higher than gold.
Straightforward ETF: PPLT
Due to the small size of the platinum market, it does not have its own miner ETF, but it is tracked in PICK alongside other mining stocks.
Companies that mine and refine platinum: ANGPY, IMP, SBSW, NPTLF
Copper
Copper is a fairly abundant mineral, one of the best conductors of electricity, and an underappreciated cornerstone of modern technology. It’s application in electrical wiring is nearly universal, leading to copper’s use in electronics, renewable energy systems, transportation and a variety of adjacent industries. Even in construction and plumbing, copper is a regularly used material. Its probably one of the most flexible metals on the market, and if it weren’t for its availability, it would be one of the most sought after minerals out there.
Straightforward ETF: CPER
Copper mining ETF: COPX
Companies that mine and refine copper: BHP, FCX, GLCNF, SCCO, KGHPF
Palladium
Palladium, like platinum, is a member of the platinum metals group and is also a rare mineral. Palladium’s primary use is in catalytic converters. It also used as a catalyst in alloys, electronics, medicine and recently in fuel cell technology. Russia controls a significant portion of palladium production, so market access to it is fairly limited.
Straightforward ETF: PALL
Companies that mine and refine palladium: IMP, SBSW
Physical ownership of metals
Many investors in precious metals prefer to keep physical ownership of these assets, for a variety of different reasons. Keeping metals yourself involves risks of theft and additional premiums from dealers, but for those interested in coinage, jewelry, numismatics, or just like the feeling of a gold bar, physical is the only way to go. Gold and silver are by far the most popular in this category (thanks to precedent), but platinum, palladium, and even copper can be physical kept, just keep in mind you will need a lot of storage for large amounts of it. The value of jewelry is the most subjective of the above categories, but 24 karat gold is always sure to fetch a handsome price. Coins of numismatic or historical value greatly vary as well, but as a rule of thumb, the rarer and better quality coin, the more it is worth. The United States, Canada, UK, and many other countries still mint gold, silver and platinum coins to this day. Bullion, or bars, are another good way to approach physical, as it demands smaller premiums and doesn’t have the added headaches that can come with coins.
You can fill multiple encyclopedias with information about different coins, but this website covers even the most obscure ones.
https://en.numista.com/catalogue/
For those interested in readily available coins, 90% silver coins are one of the cheapest ways to get into physical ownership. Special shout-out to mercury dimes for their divisibility.
https://www.jmbullion.com/ultimate-guide-to-90-silver-coins/
Where should you buy them? Well rated online dealers are a good choice and the same can be said for well rated local coin shops. Just make sure you’re getting the best price. Ebay and other markets are also popular, but only buy from very well rated sellers.
https://findbullionprices.com
5. Food and Related Commodities
Unless you’re trading a specific food commodity on the futures market, there isn’t much to differentiate each one for the average investor. This section will mostly be a rundown as not every commodity is represented in the form of ETFs and most companies engaged in this market are usually exposed to many of these. There isn’t much to say about food beyond the fact that every living human needs it. Weather, demand, and harvests impact the price of each one, so each one has their own place.
Lumber
Lumber is an essential commodity in the construction and packaging industries, any slumps in these markets typically lead to a slump in lumber prices. There are no ETFs that directly track the price of lumber, but WOOD and CUT are focused on lumber and paper companies.
Wheat, Corn, and Soybeans
All of the above grains are fairly similar, are used in a wide variety of different food products, by products, and animal feed. Given the fact that they have a pretty robust distribution around the globe, a spell of bad weather leading to a bad harvest in one corner of the world typically doesn’t shake prices too much.
Wheat ETFs: WEAT, WXET
Corn ETF: CORN, CXRN
Soybean ETF: SOYB
General agriculture ETF that includes other grains: DBA, TAGS
Sugar and Cocoa
To this day, sugar remains a very popular crop. Most of the use it has comes in the form of sweetener (just check how much sugar is in your soda) but in places like Brazil, it is also used as a significant feedstock for ethanol production.
Sugar ETF: CANE
Sadly, there are no other agricultural ETFs for commodities, those who want to trade those unlisted ought to look into futures trading.