Commodities Trading

UNDERSTANDING THE MARKET AND FACTORS AFFECTING PRICES

What are
Commodities?

Commodity trading differs from forex trading primarily in the underlying tradable security. Commodity markets deal in goods such as coffee, cocoa, and mined products like gold and oil. On the other hand, forex trading is a global market that involves trading currencies such as dollars, euros, and yen.

Commodity trading offers unique opportunities for investors, and understanding the market and factors influencing prices is important for making informed trading decisions. By considering supply and demand dynamics, currency movements, geopolitical situations, government policies, and economic growth, traders can navigate the commodity market with a better understanding of potential price fluctuations.

Overview
of the Market

Commodity markets are highly regulated compared to the forex market, which is often seen as less strictly regulated. While forex trading has some level of regulation, there are instances of circumvention and a perception among traders that having government support can be beneficial.

Commodities are traded on exchanges, whereas foreign exchanges are typically over-the-counter and traded through brokers or in the interbank market. Trading commodities on an exchange comes with daily range limits, which can affect price movements.

iFX Tradable Commodities

Here are some of the most heavily traded live indices markets available:

Instrument Name	iFX MT4 Symbol	iFX MT5 Symbol
Gold (Spot)	XAUUSD.iFX	XAUUSD.iFX
Gold (Spot Mini)	XAUUSDm.iFX	XAUUSDm.iFX
XAU/EUR	XAUEUR.iFX	XAUEUR.iFX
XAU/AUD	XAUAUD.iFX	XAUAUD.iFX
Silver (Spot)	XAGUSD.iFX	XAGUSD.iFX
Silver (Spot Mini)	XAGUSDm.iFX	XAGUSDm.iFX
XAG/AUD	XAGAUD.iFX	XAGAUD.iFX
XPT/USD	XPTUSD.iFX	XPTUSD.iFX
XPD/USD	XPDUSD.iFX	XPDUSD.iFX
UK Brent (Spot)	XBRUSD.iFX	XBRUSD.iFX
US Crude (Spot)	XTIUSD.iFX	XTIUSD.iFX
US Natural Gas (Spot)	XNGUSD.iFX	XNGUSD.iFX

Understanding How the Commodity Market Works and Factors Affecting Prices

The commodity market experiences high volatility influenced by several key factors, including

Supply and Demand

Changes in supply and demand directly impact commodity prices. Increasing demand leads to higher prices, while decreased demand coupled with increased supply can cause prices to fall.
Currency Movements

Since commodities are typically priced in USD, fluctuations in the value of the USD can directly affect commodity prices. It is important to consider currency movements when trading commodities, although markets may not always operate uniformly.
Geopolitical Situations

Political uncertainty in regions where certain commodities are produced can significantly affect their prices. Geopolitical events and conflicts can disrupt supply chains, leading to price fluctuations.
Government Policies

Government regulations and policies related to trade, export-import, subsidies, etc., can impact commodity prices. Changes in policies can affect supply and demand dynamics, ultimately influencing prices.
Economic Growth

The prosperity of a country or region plays a crucial role in commodity prices. Higher economic growth usually implies increased purchasing power, which leads to greater demand for commodities and can drive prices up.