Why trade commodities?

Category: commodity-faq

Commodity markets are crucial to the global economy because they determine the price of all the raw materials that go into the manufacturing of finished goods, but also their refining and distribution.

Thanks to the US dollar’s reserve currency status, commodities are priced in US dollars on the global markets, this means that a strong dollar makes commodities cheaper, and a weak dollar makes commodities more expensive. Perhaps central to all the commodity complexes is energy.

Today, gold is traded as a safe haven, investors flock to it at times when confidence is low in the prospects of the global economy, as well as when inflationary fears surface. The fact that the US dollar is also used as a safe haven, sometimes complicates this relationship, so it’s often useful to chart gold against currencies other than the US dollar when wanting to find out how it has truly performed.