Financial markets also offer the opportunity to invest in gold and other commodities. They can be: agricultural products, metals or energy raw materials. They are traded on separate exchanges and even have specialized exchanges. For example, the London Metal Exchange offers only metals.
The most popular raw materials on the financial markets are:
Raw materials are a very good opportunity to diversify a portfolio. This is because prices usually have an inverse correlation with the return on most asset classes. For example, when stocks and bonds fall in price, the price of raw materials rises.
Factors affecting stock and bond markets may not have any impact on commodities. Therefore, a portfolio that includes commodities will usually have a less volatile yield.
Raw materials are also used to protect against inflation. Inflation causes currencies to depreciate and thus shrinks the real value of some financial investments. On the other hand, inflation leads to rising commodity prices. Some raw materials, such as gold and silver, are considered asylum assets .
Geopolitical uncertainty, natural disasters and economic crises have a negative impact on most financial assets. During these periods, market participants focus on investing in gold and silver, which leads to higher prices.
Some traders and investors choose to stay away from commodities due to the complexity and volatility of this market. Instead, some market participants choose to trade in CFDs on commodities, thus taking full advantage without actually owning the asset.