Commodity trading has been around for centuries. However, it gained popularity in modern times when companies began to use it to hedge against inflation or deflation.
Traders are often known to be speculators, as they invest in commodities with the hope that the price of these commodities will rise.
There are 6 major commodity trading exchanges in India through which you can trade on commodities.
Top Commodities for Trading in India as Per Volume and Movement
Gold
The best commodity to trade in India is gold. The reason is that it is the only commodity that has a very strong correlation with the rupee. Also, it is considered one of the safest investment options in India.
Investors looking to invest in gold directly can purchase the physical asset, buy shares of a mutual or exchange-traded fund that replicates the price of gold, or trade futures and options in the commodities market.
Also Read - Tax on Gold Investment
Silver
The second best commodity to trade in India is Silver. Silver has always been a very stable asset with good returns in the long term, but due to its low liquidity and high transaction costs, it was not considered an investment option by many people.
However, with the launch of the MCX-SILVER exchange, this has changed completely, and now more than 80% of total trading in Silver happens on this exchange.
The MCX offers four silver contracts for trading. The most popular is the Big Silver futures contract, traded in lot sizes of 30 kg. Mini Silver, a 5 kg lot size, is the second most popular contract.
Also Read - ETFs of Silver – A Good Investment
Crude Oil
Thirdly, we have crude oil, which is also considered one of the best commodities for trading because it strongly correlates with other commodities like Gold and Silver. There are also many other factors like production cost, etc. which are also considered while trading in crude oil.
Investors interested in trading futures and options on oil can do so by purchasing them directly on a commodities exchange. However, the most common way for the average investor to get exposure to oil is to buy shares of an ETF that tracks the price of oil or a basket of related companies.
Also Read - How to read crude oil inventory data
Aluminum
Aluminum is one of the most widely traded commodities globally and has a huge impact on the global economy.
Aluminum is used in many industries, from aerospace to construction materials to food packaging. Aluminum is also used in transportation, building and construction, electrical equipment, machinery, and much more.
Copper
Copper is another popular metal and is considered one of the best metals to trade. It's used in everything from wiring to plumbing to roofing materials. Copper is also used in jewelry making and other industrial applications.
Copper demand will be high, which means that copper futures are likely to rise in value. Trading in these futures is done on Indian commodity exchanges like the Multi-Commodity Exchange (MCX).
Final Note
When it comes to commodities investing, there are a lot of factors to consider. Commodities can be volatile, they're not as liquid as stocks and bonds, and they don't offer the same predictability that stocks do. But if you pick the right ones and diversify your portfolio correctly, commodities can provide solid returns over time.
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