A commodity is a raw material that can be bought, sold, and used in the production of goods and services. Commodities are highly correlated with the global economy and industrial production, making them important for hedging risks and diversifying investments. Through EBC, you can participate in global commodity trading without directly buying or selling, enabling you to build diversified portfolios.
Commodities mainly fall into two categories:
Hard commodities: These include metals (gold, silver, copper) and energy products (crude oil, natural gas) extracted from nature. They are highly correlated with the global economy and industrial production and rank among the world's most traded commodities.
Soft commodities: These are products that are produced or grown, such as corn, soybeans, cocoa, livestock, and other crops. Soft commodities are primarily agricultural products and play an important role in hedging.
In terms of trading volume, gold is the most popular commodity due to its inherent value and safe-haven status, while crude oil is the most traded energy product globally.
Market hours for gold and silver are from Monday at 1 AM to Friday at midnight, with a daily one-hour break from 12 AM to 1 AM. Crude oil trading hours are from Monday at 3 AM to Friday at midnight, with a daily three-hour break from 12 AM to 3 AM. Natural gas and US crude oil trading hours are from Monday at 1 AM to Friday at midnight, with a daily one-hour break from 12 AM to 1 AM.
A point in commodity trading is the smallest price movement in commodity price fluctuations, often referred to as "pips." The pip value varies for different commodities. For gold (XAU), a pip corresponds to the second decimal point, which is 0.1. For example, if gold fluctuates from 1874.52 to 1874.62, it has moved one pip. For one standard lot of gold, a one-pip movement results in a 10 USD gain or loss. For silver (XAG), a pip corresponds to the third decimal point, which is 0.001. For example, if silver fluctuates from 22.466 to 22.476, it has moved one pip. For one standard lot of silver, a one-pip movement results in a 50 USD gain or loss. For natural gas (XNG), a pip corresponds to the fourth decimal point, which is 0.0001. For crude oil (XBR/XTI), a pip corresponds to the third decimal point, which is 0.001. It is important to understand the pip values of different commodities before trading.
As a "hard currency," gold is recognised as an anchor of value. In uncertain times, it often becomes the primary investment target for risk aversion, asset appreciation, and value protection. Gold is sensitive to interest rates and typically has an inverse relationship with the US dollar. For example, when the Federal Reserve raises interest rates, the expectation of a stronger dollar can reduce gold demand. Additionally, gold is directly influenced by market expectations of the economy. For instance, an inverted yield curve between the two-year and ten-year US Treasury yields can trigger recession fears, which may push gold prices higher. As a physical asset, gold is also directly affected by market supply and demand, with increased physical demand typically supporting gold prices. Common barometers include gold ETFs, which track changes in holdings and reflect market demand. EBC provides daily real-time tracking data and analytical reports on gold ETFs, offering competitive spreads for gold trading based on deep liquidity.
Crude oil, often referred to as "the king of commodities," is highly correlated with economic and production cycles. Market supply and demand are the primary factors affecting crude oil prices. Generally, when oil production exceeds market demand expectations, oil prices tend to decline. Oil drilling data and changes in production by OPEC are closely monitored to track crude production. As a pro-cyclical commodity, crude oil demand typically increases during economic expansion, pushing prices higher, and contracts during recessions, suppressing prices. It is important to note that crude oil is not a finished product and is easily influenced by its related industry chain. For example, insufficient refinery utilisation rates can lead to higher refined oil prices, driving demand for crude oil in refineries. Additionally, product demand highly correlated with crude oil, such as in the automotive sector, directly impacts crude oil prices. You can flexibly build exposure to oil markets and seize trading opportunities without directly purchasing crude oil. At EBC, you can access the world’s largest oil trading market and adjust your trading strategy accordingly, allowing you to capitalise on market opportunities.
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