Commodities refer to commodities that are homogeneous, tradable, and widely used as basic industrial raw materials, and can only be traded on legal commodity exchanges. Commodities can be roughly divided into three major categories: energy commodities, metal commodities and agricultural commodities.

1. What are commodities

Commodities refer to commodities that are homogeneous, tradable, and widely used as basic industrial raw materials. They can only be traded on legal commodity exchanges. Commodities can be roughly divided into three categories: energy commodities, metal commodities and agricultural products:

1. Energy and chemical products: crude oil, fuel oil, unleaded regular gasoline, propane, natural rubber, etc.;

2. Metal products: gold, silver, copper, aluminum, lead, zinc, nickel, palladium, platinum;

3. Agricultural (by-product) products: corn, soybeans, wheat, rice, Oats, barley, rye, pork belly, live pigs, live cattle, calves, soybean meal, soybean oil, cocoa, coffee, cotton, wool, sugar, orange juice, rapeseed oil, eggs, etc.

2. The commodity family has a lot of knowledge

Investors with some financial knowledge should know that most financial product prices are affected by market and macro factors, and commodities are considered to be affected by macro factors. The most profound impact.

Influencing factors

The trend of commodity prices is mainly affected by the economic cycle, the supply and demand relationship between industries, monetary policy, etc. For example, when macroeconomic fundamentals strengthen, the demand for industrial products such as copper, aluminum, lead, zinc, and crude oil will increase, thus benefiting related trading varieties.

For example, during the global financial crisis in 2008, the CRB (Reuters Commodity Research Bureau) commodity price index fell by 24%; in 2009 and 2010, as authorities around the world began to implement economic stimulus and monetary releases, The index rose another 36% and 23% respectively. The indiscriminate issuance of global currency has once again pushed up commodity prices.

For another example, China’s supply measurement reform has closed many coal and steel plants, reduced production capacity, weakened the supply of coal, steel and non-ferrous metals, making the supply and demand relationship of bulk commodities increasingly tense, which once triggered A-share "The coals are flying and the colors are dancing" market trend. Of course, in addition to the macro-level economic cycle, there is also the supply and demand theory involving the micro-level. The principles are the same. Supply and demand determine the price, so I will not go into details here.

Commodity Currency

Commodities are actually very closely related to foreign exchange, and foreign exchange is used by a country to import commodities. Over time, some major commodity producers and exporters have Based on its own advantages and characteristics, the so-called commodity currency was formed.

Commodity currencies are actually currencies backed by physical objects (commodities). That is, the currency exchange rates of these countries are highly correlated with a certain commodity, such as the Canadian dollar-crude oil, the Australian dollar-minerals, and the South African blue. Special-gold etc. For example, South Africa is an important gold exporter, and the South African rand has been in line with the trend of international gold for a long time.

How to invest in commodities

Commodities are somewhat different from other investment varieties. The trading volume, demand and supply of commodities are generally relatively large, so the futures and spot prices of commodities are generally relatively large. The market is an authoritative price that is formed based on the extensive participation of both supply and demand parties in transactions and full competition on a large scale.

In addition, bulk commodities are also standardized commodities, and the futures contracts they correspond to stipulate in advance the quality standards of the delivered commodities. For example, 1 lot of fuel oil 1804 contract corresponds to 50 tons of fuel oil. Precisely because commodities are mostly upstream industrial products, the futures and spot prices of their supply and demand conditions will directly affect the entire economic system, so commodity investment is trusted by many individual or institutional investors.

There are three main opportunities to participate in commodity investment:

1. Commodity funds

We often see funds in the market, such as funds named Gold ETF, XX crude oil, XX commodity, XX commodity ETF connection and commodity QDII, etc., are all funds that invest in the commodity market, as well as the previous issue of "Attention! Don't touch these pitfalls in precious metal financial management! (Gold Chapter)" 》 mentioned the metal T+D products of the Shanghai Gold Exchange and the Shanghai Futures Exchange, as well as the commodity financial products of banks.

This type of commodity ETF (traded open-end index fund) invests in physical commodities and futures contracts through fund companies. The advantage of commodity ETFs is that they allow investors to make purchases and redemptions without having to directly participate in commodity market transactions. They have good liquidity and are less risky than commodity futures. They are very suitable for the investment needs of ordinary people.

2. Spot goods

Spot goods are mainly used by enterprises to sell and purchase products through this electronic trading platform, complete electronic purchase and sales contracts, collect and pay payments, etc., and finally Achieve effective delivery of goods.

Characteristics of spot commodity trading: two-way trading, hedging mechanism, you can make money in both ups and downs, and leverage mechanism to use small to win big and amplify capital transactions.

3. Commodity futures

Commodity futures are standardized contracts based on certain commodities such as cotton, soybeans, oil, etc.

A standardized agreement on the purchase and sale of a certain quantity of physical commodities between the buyer and the seller at an agreed date in the future (such as a one-year contract, that is, March 2019) at the price agreed upon at the time of signing (such as 3,000 yuan/metric ton).

The rise and fall of commodity futures prices is essentially a game. Institutional investors often play different roles as hedging, arbitrage and speculators in the commodity futures market. After China restricted stock index futures trading, many hedge funds turned to commodity futures.

Ordinary investors can invest as long as they go to a futures company to open an account. However, it should be noted that there are currently only three legal futures exchanges in China: Shanghai Futures Exchange (mainly trading copper, gold, aluminum, zinc, natural rubber, fuel, etc.); Dalian Commodity Futures Exchange (mainly trading soybeans, soybean oil) , soybean meal, corn, palm oil, polyethylene, etc.); Zhengzhou Commodity Futures Exchange (mainly trading strong wheat, hard wheat, cotton, sugar, PTA, rapeseed oil, etc.).

Therefore, some so-called other exchanges, external markets, etc. still need more than one eye. Moreover, futures investment is essentially for the purpose of obtaining price differences. It is a speculative business with leverage attributes. If it encounters severe market fluctuations, it may cause huge losses.