Commodities
Difficulty intermediate
Overview
Commodities are physical assets traded on exchanges. They include energy, metals, and agricultural products.
Commodity Categories
Energy
| Commodity |
Symbol |
Unit |
Key Drivers |
| Crude Oil (WTI) |
CL |
Barrels |
OPEC, geopolitics, demand |
| Brent Crude |
BZ |
Barrels |
Global supply, demand |
| Natural Gas |
NG |
MMBtu |
Weather, storage, production |
| Gasoline |
RB |
Gallons |
Driving season, refining |
| Commodity |
Symbol |
Unit |
Key Drivers |
| Gold |
GC |
Troy oz |
Real rates, USD, fear |
| Silver |
SI |
Troy oz |
Gold, industrial demand |
| Copper |
HG |
Pounds |
Global growth, construction |
| Platinum |
PL |
Troy oz |
Auto catalyst, jewelry |
Agriculture
| Commodity |
Symbol |
Unit |
Key Drivers |
| Corn |
ZC |
Bushels |
Weather, ethanol, exports |
| Soybeans |
ZS |
Bushels |
Weather, China demand |
| Wheat |
ZW |
Bushels |
Weather, global supply |
| Coffee |
KC |
Pounds |
Weather, Brazil supply |
Trading Methods
Futures Contracts
Standardized contracts traded on exchanges
Require margin
Physical or cash settlement
Expiration dates
ETFs/ETNs
Commodity ETFs: GLD (gold), USO (oil)
No futures roll complexity
Tracking error vs. spot
Tax implications (K-1 for some)
Direct Commodity Trading
Mining stocks for metals exposure
Energy stocks for oil exposure
Agricultural companies for crop exposure
Forward Curve
contango = future > spot · long roll loses each rebalance · backwardation = future < spot · long roll earns each rebalance
Contango: Future prices > Spot prices
- Roll yield negative for long positions
- Indicates ample supply
Backwardation: Future prices < Spot prices
- Roll yield positive for long positions
- Indicates tight supply
Seasonal Patterns
| Commodity |
Seasonal Pattern |
| Natural Gas |
Higher in winter (heating demand) |
| Gasoline |
Higher in summer (driving season) |
| Gold |
Stronger in Q4 (jewelry demand) |
| Corn |
Lower at harvest (supply surge) |
| Soybeans |
Weather-driven in growing season |
Macro Drivers
| Factor |
Impact on Commodities |
| USD strength |
Negative (dollar-denominated) |
| Inflation |
Positive (inflation hedge) |
| Global growth |
Positive (demand) |
| Geopolitical risk |
Positive (supply disruption) |
| Interest rates |
Negative (storage cost) |
Practical Guidelines
- Understand the Curve — Contango/backwardation matters
- Seasonality — Know seasonal patterns
- Storage Costs — Physical commodities have carry costs
- Supply/Demand — Fundamentals drive long-term prices
- Correlations — Commodities diversify portfolios
- Roll Costs — Futures rolling has real costs
- Leverage — Futures are highly leveraged; manage risk
Next Steps