Stock market trading is a sought-after investment medium. In addition, commodity trading is a preferred alternative for investors to put their money into. The commodity trading arena holds a significant place in the overall investment space.
What is a Commodity?
A commodity refers to a simple product or good having a key importance in the daily life of an individual. The commodity can either be an individual good or an asset group altogether. It can be inclusive of the following: food items, energy, gold, silver, other metals, etc. The commodities are exchangeable. Any type of goods which is movable and can be bought or sold other than money and actionable claims can be classified under the category of commodity.
What is Commodity Trading?
Commodity exchanges are the platforms wherein commodity online trading takes place. The following are some of the major commodity exchanges in India wherein you can make a trade:
- Multi Commodity Exchange (MCX) – It is used for the online trading of energy and metals.
- National Commodity and Derivatives Exchange – It is used for the online trading of agricultural and other commodities. It has a lesser volume of energy and metals for trading.
Let us now discuss the types of commodities that are traded in the Indian stock market.
- Commodity Bullions:
These consist of precious metals such as silver and gold. Due to their scarce availability, these commodities are also considered currency. ISO 4217 currency code is embarked on the metals such as platinum, silver, gold, and palladium, thereby classifying them as de facto money.
The major constituents falling under the commodity bullions category are as follows:
- Gold – It is traded in the following forms on the MCX: Gold, Gold Mini, Gold Guinea, and Gold Petal
- Silver – It is traded in the following forms on the MCX: Silver, Silver Mini, Silver Micro
- Base Metals:
The base metals date back to the period of civilisation. It includes the following metals- iron, copper, mercury, tin, lead, and silver. These types of metals are relatively cheaper as compared to bullion metals. The base metals form an integral part of most industrial and domestic appliances.
The commodities which drive the economy of a country are energy commodities. They boost and provide the necessary energy as required for the economy to function smoothly. The primary commodities that form part of the major consumption of the nation are natural gas and crude oil along with its by-products. The by-products of crude are the following: diesel, kerosene, petrol, etc.
- Agriculture Commodities:
Agriculture is by far the most preferred occupation for the people of rural India. India ranks second in the world for its farm production. The country is a major exporter of agricultural products globally. Hence, the agriculture commodities market is a distinguished arena for investors that hold good investment opportunities.
For diversification from traditional stock market trading, commodities are considered to be a safe bet. With the advent of online trading app, the market is ever-growing, and the commodities trading space is considered to be a high risk and high return area. If you are someone who is enthusiastic enough to get to the bottom of things, be rest assured that with sound knowledge and effective analysis, you as an investor can evaluate the potential and accordingly plan your investments.