In financial news and global markets, we often see price fluctuations in these assets. Gold, crude oil, wheat, copper, and natural gas may seem entirely different, but in TradFi markets, they all belong to an important asset class—Commodities.
So, what are commodities? Why do commodity prices change? And why should ordinary traders pay attention to them?
What are commodities?
Simply put, commodities are basic physical assets that can be traded in a standardized manner.
Unlike stocks, which represent partial ownership in a company, commodities correspond to resources in the real world with practical uses, such as gold, crude oil, natural gas, copper, wheat, and coffee.
Based on their uses, commodities in the market can be broadly categorized into several types:
- Precious metals: gold, silver, etc.
- Energy: crude oil, natural gas, etc.
- Industrial metals: copper, aluminum, etc.
- Agricultural products: wheat, corn, soybeans, coffee, etc.
These commodities exist in the real world but are also important trading instruments in global financial markets.
Why can commodities also be traded?
Suppose an airline is concerned about a potential rise in fuel prices six months from now and wants to lock in future fuel costs; a gold producer might also want to determine the future selling price of its gold in advance.
It is these practical needs that have driven the development of markets like commodity futures.
Today, participants in the commodity markets include not only producers and businesses but also financial institutions, funds, and ordinary traders.
Therefore, trading commodities does not necessarily mean physically buying a barrel of oil or bringing home a gold bar.
Investors can participate in the market through futures, ETFs, and other financial instruments linked to commodity prices.
For traders, the real focus is typically:
Will the future price of a commodity rise or fall?
Gold: One of the Most Familiar Commodities
Gold is likely the most familiar commodity for the average person.
Aside from being used in jewelry and certain industrial fields, gold is also a crucial global reserve asset, giving it unique attributes in financial markets.
When economic uncertainty, geopolitical risks, or severe financial market volatility arise, investors often turn their attention to gold, which is why it is frequently referred to as a "safe-haven asset."
Many factors influence gold prices, but several are particularly important:
The U.S. dollar, interest rates, Federal Reserve policy, inflation, and market risk sentiment.
For example, when the market anticipates a Fed rate cut, interest rates may fall. Since gold itself does not generate interest, lower rates can reduce the opportunity cost of holding gold, thereby increasing its relative appeal.
This is also why gold markets often draw attention during each Federal Reserve meeting or following the release of U.S. CPI or non-farm payroll data.
Thus, observing gold also means observing the global market's assessment of the dollar, interest rates, and risk.
Crude Oil: The "Fuel" of the Global Economy
If gold reflects more of a financial attribute, crude oil more directly embodies the supply and demand characteristics of a commodity.
Crude oil is one of the world's most important energy sources, closely linked to transportation, aviation, manufacturing, and the chemical industry.
The two most common international crude oil price benchmarks are:
WTI Crude and Brent Crude.
The core factors affecting oil prices can be summarized in two words:
Supply and demand.
When global economic growth increases energy demand while oil supply is limited, prices may rise; conversely, when economic growth slows, demand falls, or supply increases, oil prices may face downward pressure.
Additionally, OPEC+ production policies, geopolitical situations in major oil-producing countries, changes in crude oil inventories, and the smooth operation of key transportation routes can all impact oil prices.
Therefore, you often see:
OPEC+ announces production cuts → Market worries about reduced supply → Oil prices rise
Or:
Economic recession fears intensify → Market worries about falling energy demand → Oil prices face pressure
This is also a very clear distinction between crude oil and gold.
Gold prices are often closely linked to the dollar, interest rates, and safe-haven sentiment, while crude oil is more sensitive to real-world changes in production, consumption, and supply.
Why Do Commodity Prices Sometimes Fluctuate So Much?
This is because one of the key characteristics of commodities is that supply cannot be adjusted immediately, while demand can change rapidly.
For example, a war may affect crude oil supply from a major producing region; extreme weather can impact the yield of wheat, soybeans, and other agricultural products; the shutdown of a major mine can affect the supply of industrial metals like copper.
Such changes can quickly alter market expectations about future supply and demand dynamics.
Therefore, commodity traders need to pay attention not only to economic data but also to weather, wars, industrial policies, inventories, and even transportation conditions.
This is also a significant difference between commodity markets and stock markets.
Why Should Crypto Users Pay Attention to Commodities?
For users accustomed to the Crypto market, commodities may seem like a completely different world.
However, there are many connections between them.
For example:
Rising crude oil → Increased energy costs → Rising inflationary pressure
If inflation remains persistently high:
The market may reassess Fed rate cut expectations → U.S. Treasury yields and the dollar change
This, in turn, could affect:
Gold, U.S. stocks, and risk assets like Crypto.
This means that assets in the global markets are not isolated from each other.
Gold, crude oil, the U.S. dollar, U.S. Treasuries, U.S. stocks, and Bitcoin may seem to belong to completely different markets, yet they can all be influenced by the same set of macroeconomic factors.
Understanding the commodity market is also about learning how to move from observing the price movements of a single asset to gradually understanding the entire global financial market.
For Beginners, What to Focus on First When Looking at Commodities?
When starting to learn about the commodity market, there's no need to memorize all the different types at once.
You can begin with the two most representative commodities:
Gold – Focus on the U.S. dollar, interest rates, and safe-haven sentiment.
Crude oil – Focus on supply, demand, and geopolitics.
After understanding these two assets, it becomes much easier to learn about silver, natural gas, copper, and agricultural products.
