A Beginner's Guide to Investing: Top 10 Commodities of 2023

Commodities in a Nutshell Commodities refer to raw materials and primary agricultural products that can be bought and sold, such as gold, oil, or wheat.

Commodities in a Nutshell

Commodities refer to raw materials and primary agricultural products that can be bought and sold, such as gold, oil, or wheat. They are considered to be interchangeable with one another and are produced by many producers. The price of a commodity is determined by the market forces of supply and demand. Commodities can be classified into two categories: hard and soft. Hard commodities include metals like gold, aluminum, and copper, and energy products such as natural gas, crude oil, and unleaded gasoline. Soft commodities are products grown, such as soybeans, corn, wheat, and cattle.

Commodities as an Inflation Hedge

Commodities can act as a hedge against inflation, which is a general rise in prices without coordination. As the cost of materials to produce goods and services increases, inflation accelerates. Commodities can protect businesses from inflation by providing intrinsic financial value, creating diversified investment opportunities, and increasing in value as global prices for goods increase.

10 Best Commodities To Invest in 2023

As inflation continues to rise, investing in commodities has become increasingly important. Here are the top 10 commodities to invest in 2023:

1. Gold

Gold is the world's most valuable commodity and has been used as a currency, a store of value, and a hedge against inflation for over 5,000 years. Its value has remained steady throughout history, making it a reliable investment. Despite its short-term volatility, gold's long-term value has always remained stable. It is also a lucrative investment commodity because of its indirect relationship with the dollar.

2. Silver

Silver is an excellent safe harbor investment, second only to gold. It has been used extensively for thousands of years, and its demand remains high. Silver trade is used not only in industry and as a precious metal commodity but also in medicine, electronics, and photography. Its unique properties as both a precious metal and an industrial metal make it an attractive investment option.

3. Lithium

Lithium is not a precious metal, but it has become integral to severaltechnological advances, such as smartphones and electric cars. Its demand is expected to surpass output in 2027, making it an excellent investment option. Investors can gain access to the industry by investing in lithium using securities and ETFs.

4. Copper

Copper serves as an excellent inflation hedge both directly and indirectly. It can be held in physical form as coins, bullion bars, or futures, or indirectly as copper ETFs, copper miner stocks, or copper mutual funds.

5. Aluminum

Aluminum is an excellent investment option because of its current value projection of $2126/t with a long-term forecast of $2,276/t by 2026. Investors can start by investing in mining stocks or aluminum producers like China, or trade aluminum ETFs, which have excellent returns and carry less risk than aluminum futures.

6. Palladium

Palladium is a rare metal that is used in catalytic converters in vehicles to reduce emissions. Its demand has been increasing due to the growing popularity of electric vehicles. Palladium is also used in electronics, jewelry, and dentistry. Investors can gain exposure to the metal through palladium futures, mining stocks, or ETFs.

7. Natural Gas

Natural gas is an important source of energy worldwide and is often used as a cleaner alternative to oil and coal. It has a wide range of applications, from heating homes and powering vehicles to producing electricity. In addition, natural gas has been touted as a potential substitute for gasoline in vehicles.

Investing in natural gas can be done in several ways. One option is to invest in natural gas ETFs or stocks, which allow you to invest in companies that are involved in natural gas exploration, production, or distribution. Another option is to invest directly in natural gas futures or options, although this can be a riskier investment strategy.

8. Corn

Corn is a staple crop around the world, and demand for it continues to rise. It is used not only as a food source but also as a feedstock for producing ethanol, a renewable fuel source. In addition, corn is used in the production of many other products, including plastics, fabrics, and adhesives.

Investing in corn can be done through futures contracts or ETFs that track the price of corn. However, it is important to note that investing in agricultural commodities can be more volatile than other types of investments due to factors such as weather conditions and crop yields.

9. Soybeans

Soybeans are another important agricultural commodity that is widely traded around the world. They are used as a food source and as a feedstock for producing animal feed, biodiesel, and other products. Soybeans are also used in the production of many industrial products, such as plastics, , and solvents.

Investing in soybeans can be done through futures contracts or ETFs that track the price of soybeans. As with corn, investing in agricultural commodities can be volatile due to factors such as weather conditions and crop yields.

10. Cocoa

Cocoa is a key ingredient in chocolate and is widely traded around the world. Demand for cocoa continues to rise, driven by increasing global consumption of chocolate products. In addition, cocoa is used in the production of many other food and beverage products.

Investing in cocoa can be done through futures contracts or ETFs that track the price of cocoa. It is important to note that investing in agricultural commodities can be volatile, and cocoa prices can be affected by factors such as weather conditions and political instability in producing countries.

Conclusion:

In conclusion, investing in commodities can be a great way to diversify your portfolio and protect your investments from inflation. By investing in some of the top commodities in 2023, such as gold, silver, lithium, copper, aluminum, oil, natural gas, corn, soybeans, and cocoa, you can build a stronger financial safety net and make better buying decisions.

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