How to choose commodities? Master these 6 dimensions to easily find the worth-while varieties to invest in

When it comes to investment allocation, stocks and bonds are well-known to everyone, but many investors overlook an equally important asset class—commodities. They are highly liquid, transparent in pricing, and closely correlated with economic cycles, making them the “cornerstone” of asset allocation. But here’s the question: with so many types of commodities, which ones are worth investing in?

What exactly do commodities encompass?

First, understand a basic concept: commodities are not everyday goods found in small shops, but large-scale physical materials that are traded in bulk, possess commodity attributes, and are used in industrial production and consumption. Their defining feature is one word—“big”: large supply, large demand, large circulation.

Currently, the main traded commodities in the market are divided into several categories:

Energy is the crown jewel, including crude oil, gasoline, fuel oil, natural gas, etc. Among them, crude oil holds a special position, with astronomical figures for both supply and demand, and it permeates every aspect of daily life—plastic packaging comes from downstream of crude oil, PTA for fabrics also derives from crude oil, PVC for flooring and pipelines is the same, and gasoline is essential for travel. That’s why crude oil is called the “King of Commodities.”

Industrial Metals include copper, aluminum, lead, zinc, iron ore, etc., which are the lifeblood of manufacturing.

Precious Metals such as gold, silver, palladium, platinum are characterized by their resistance to corrosion, and possess natural hedging and store-of-value properties, traditionally serving as safe havens for investors.

Agricultural Products cover widely cultivated grains like soybeans, corn, wheat, soft commodities include sugar, cotton, coffee, and livestock products include pork, beef, etc.

Which 6 categories should investors focus on?

Not all commodities are suitable for investment. For example, electricity, despite high demand, is limited by regional restrictions and cannot be traded across borders, making it unattractive to retail investors. So, what are the “good” commodities?

First, liquidity must be sufficient

The commodity must have enough capital participation to ensure effective pricing and prevent manipulation. Crude oil, copper, gold, soybeans, and corn all meet this criterion.

Second, a well-established global pricing system

The commodity should be listed on multiple exchanges worldwide, allowing investors everywhere to trade at a unified price. Crude oil and gold are prime examples—quotations from New York, London, and Shanghai are generally synchronized.

Third, low storage and transportation costs

It should be easy to store and circulate without being affected by regional or climatic factors. Metals, minerals, and grains perform well in this regard.

Fourth, high product standardization

Regardless of where they are produced, quality certifications are uniform and controllable. Gold purity, API gravity of crude oil, and other standards are internationally recognized, avoiding disputes over quality.

Fifth, long-term and broad demand

There is sustained demand worldwide—oil, natural gas, wheat, soybeans are essential needs.

Sixth, accessible fundamental information

Investors can easily obtain core data on supply, demand, and macroeconomic environment, rather than being kept in the dark.

Based on these six dimensions, the most noteworthy commodities include: crude oil, copper, aluminum, gold, silver, soybeans, corn, sugar, and cotton.

When is the best time to get involved in commodities?

Since commodities are globally priced, the strongest driving force occurs when major economies’ cycles resonate together. After the 2020 pandemic outbreak, central banks worldwide adopted quantitative easing policies, leading to abundant global liquidity—“more money than goods”—and consequently, a general rise in commodity prices. Investors who entered during this period reaped substantial gains.

How to participate in commodity investment?

Practically, there are two main paths: one is physical investment (buying and selling spot goods, investing in mines), and the other is derivatives trading (futures, options). For most retail investors, commodity futures are the easiest to operate.

Each futures contract corresponds to a specific underlying—crude oil futures to crude oil, copper futures to copper. But the key is understanding the contract expiration mechanism: futures prices are based on the spot price expected at the contract’s expiration month. In simple terms, you need to predict what the spot price will be at expiration and make trading decisions accordingly.

The two core aspects of futures trading are:

Fundamental analysis—studying macroeconomic conditions, industry supply, and demand changes. This determines the direction and magnitude of price movements. For example, OPEC production cuts can push oil prices higher, El Niño phenomena can influence agricultural prices.

Technical analysis—using charts and indicators to judge short-term trends and entry points. But relying solely on technical analysis can be risky—you cannot determine how long a trend will last or how big the rally might be.

The real winners combine both: let fundamental analysis confirm the overall trend, and use technical analysis to precisely identify entry and exit points. This approach improves win rates and risk control.

Final words

Commodities are not just goods; they are part of the process of re-pricing the global industrial chain. Instead of blindly following the crowd, it’s better to systematically learn how to select high-liquidity, transparent, and fundamentally driven quality commodities, and then trade by combining fundamental and technical analysis. Crude oil, copper, aluminum, gold, silver, soybeans, corn, sugar, and cotton are all worth in-depth research.