A commodity is a natural resource or an asset that holds a monetary value that traders can buy and sell, like gold, iron, petroleum, crude oil etc. The newcomers in the Australian market might find it confusing to differentiate between trading commodities as an investment and business with them. There are several ways investors trade commodities, including physical and online transactions. Read more and learn about the types of assets and platforms available for trade in the country.
Brief Types of Commodities Trade
Commodities, as mentioned above, are raw materials that buyers, brokers and sellers use as a loose term. Even cryptocurrencies are commodities when traders trade them as digital assets. Energy sources like electricity and gasoline to precious metals like gold and silver are trade commodities. Therefore, any resource with a value that investors can access in the market to trade for the short or long term is a commodity available for trade. Day traders make transactions frequently and in short time frames. Therefore, they mostly use online platforms like Metatrader. They avoid physical possession of commodities and commit to speculating daily price fluctuations. Retail and institutional traders usually hold their positions for longer based on the market conditions.
How Is Commodities Trading in Australia Different?
Australian commodities trading and transaction happen through the Australian Securities and Investments Commission (ASIC)-regulated brokers, exchanges and platforms. It oversees the financial services to ensure safety guidelines and regulated trade. Australian exchanges like ASK and other online brokerage platforms have varying fee structures, services and commissions for trading commodities. Compared to commodities trade in the US or Europe, research plays a crucial role in Australian trading. Several companies offer stock research for traders, and they prefer to dig before investing in the commodity shares. The trading hours for Australians are different, considering their time zone. Many might find themselves trading in the middle of the night or during the early mornings. It depends on the market or commodity they desire to trade.
What Commodities Can Australians Trade?
Australia has a rich source of commodities available for trade.
Metal commodities form an umbrella term for common metals and precious metals available in the country. Silver, platinum, palladium and gold are the precious metals that have huge demand in the industrial manufacturing, jewellery and electronic industries. Common metals like iron ore, copper and steel are essential building blocks of construction, automation and utensil industries.
Farming is one of the oldest forms of commodities responsible for a significant share of commodity markets. Australia’s agricultural assets include sugar, coffee, corn, soybeans, and wheat. They are exported to countries like the US, Argentina, Brazil, China, India, Indonesia, Thailand, Colombia creating high demand. It also includes livestock like cattle, lean hogs and buffalos.
The raw materials that come under energy commodities help create energy necessary for commercial, industrial or retail use. These include electricity, natural gas, ethanol, crude oil, and more.
Environmental Commodities and Cryptocurrency
Environmental and cryptocurrency commodities form the non-physical assents that traders cannot trade in their physical form. Environmental commodities are related to the demand for renewable energy and energy credits, while cryptocurrency assets rely on mass speculation of their values.
Different Ways to Trade Commodities in Australia
While most trading commodities are tangible, accessing the commodities and trading them is contradictory. Most financial trading derivatives involve non-physical transactions on online platforms. Australia has contracts for difference (CFDs) and Futures contracts that traders prefer. Apart from these ways, the investors also trade through bullions, futures, ETFs, mutual funds, shares and options.