Many experts agree that 2020 will be a gateway for commodities, with the potential to reach new highs this year. Commodity investing has been a very significant business. It links different cultures and people together.
Investments tend to protect investors against the effects of inflation. The demand for commodities grows during periods of high inflation, which pushes up the prices. Although commodity prices fluctuate in the global market, demand is still active.
One thing to consider is that commodities tend to be much more volatile than other investments, and investors who trade futures should keep in mind that it involves speculation.
Crude Oil
Crude oil is an unrefined petroleum product. After production, it’s refined into many different usable products, including gasoline, diesel, ink, cosmetics, synthetic fibers, plastics, medicines, linoleum, shingles, solvents, fertilizer, asphalt and various forms of petrochemicals.
Crude oil usually reacts to the laws of supply and demand. When the demand is high, supply is low, and prices tend to rise. When the demand declines, supplies are steady, so the prices drop.
Investing in crude oil isn’t easy. The most direct method of owning the commodity is futures. But they can be highly volatile and need enough capital. They also need a lot of knowledge, so it’s not a good option for amateur investors.
Investors may consider acquiring stocks in oil companies, crude oil mutual funds, or even exchange-traded funds(ETFs). Other alternatives are buying shares in mutual funds or energy sector ETFs, which invest directly in oil company stocks. These options have more diversified offerings, so they tend to come with lower risks.
Gold
Gold is the ultimate haven commodity: it grows on uncertainty and fear. Unlike crude oil, it is possible to take possession of the physical product. Just one ounce of gold can be stretched to 300 square feet. Another property of gold is high resistance to oxidation. It is also unaffected by most acids and bases. Gold can be owned by purchasing gold bullion bars or coins. But this means it needs storing place like a safety deposit box or a vault.
Palladium
Some experts readily name it “metal of the year” for 2020, too. Most of the palladium produced across the world is for making catalytic converters for cars. A catalytic converter is a vehicle emission control device that turns the most toxic parts of the exhaust (carbon monoxide, hydrocarbons, and nitrogen oxide) into less dangerous compounds. They have been in cars for 40 years, and they are among the most expensive parts of a vehicle: a single catalytic converter costs more than $1,000.
Palladium investors should consider ETFs too. ETF works like an index fund, but where palladium shares trade like stocks on an exchange. Palladium metal ETFs are generally set up to follow the performance of palladium prices over time, while most exchanges will keep large quantities of the metal on reserve. Two standard North American ETFs for Palladium are the Sprott Physical Platinum and Palladium Trust and ETFS Physical Palladium Shares.
