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The Best Commodity To Invest In 2023

27 Apr 2023

In the stock markets and the commodity markets, the question of what the next big thing to invest in is always on investors’ and traders’ minds. Commodity traders, especially, are constantly on the hunt for fresh investment opportunities. Commodity investments prove to be an alternative investment class offering a hedge against the forces of inflation. Savvy traders and investors can get to know about the best commodity on the market and invest with the hope of potential gains. 

Some Basics About Commodities

There may be no such thing as the “best commodity” to invest in. Rather, several commodities may pose lucrative options for investors. However, before getting into which commodities are good to invest in for 2023, some basic knowledge about commodities should be touched upon. 

Essentially, commodities are those things which can be bought and sold. They could be such things as tea, corn, wheat, or raw material used to make other products. Commodities like gold and silver are popular investment choices for traders, and some commodities may be available to invest in their physical form or through the commodities or derivatives markets. To put commodities into perspective about the best commodity in 2023, there is some reasoning behind getting into details about the previous year’s (2022) commodity markets. 

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What was 2022 like for commodities?

The year 2022 got off to an optimistic start where commodities markets were concerned. In fact, the first half of the year looked bright for traders and investors. Nonetheless, the initial excitement soon abated as macroeconomic variables took over and caused a degree of unforeseen turbulence. Commodity prices dropped temporarily, causing investors some pain. 

In February 2022, with Russia's invasion of Ukraine, shockwaves were sent throughout the world. The markets were not to be left out as commodity prices saw a sharp rise. Pieces rose to levels which had been unseen in the previous decade. This happened mainly because Ukraine and Russia are major exporters of a number of commodities like agricultural products and energy. There was already some pressure on commodity markets due to the health crisis of the years before, and the crisis in Ukraine only served to enhance the issue. No one was thinking about the best commodity to invest in at this point. The crisis in Ukraine caused severe disruptions in global energy supply chains because several countries are dependent on them to attain different commodities. 

The Rise of Commodities in 2023

After nearly three years of flux in the commodity markets, the biggest commodity exporters may try to relax in 2023. For investors, commodities act as a hedge against inflation, diversify a portfolio and can be a mitigating factor for volatility. In 2023, investors will likely think of the inflation that sowed its seeds last year and is still gripping most parts of the world when thinking about commodity investment. The pros of commodity investment are also that you get a myriad of ways of investing from buying commodities like gold directly to investing in stocks, ETFs and futures and options contracts. You can also invest in commodity-based mutual funds

The Best Commodity in 2023 - Is there just one?

When you talk of commodities to invest in there are many that you can opt for. Choosing just a single one and saying that it's the “best” would be incorrect, although there are some commodities like gold which are always popular. Without further ado, here is a list of some top commodities you can consider in 2023: 

  • Gold

Gold is almost universally accepted as the investment of choice in the commodities markets, and especially so in India and other Asian countries. One of the most valuable and oldest commodities, it has become a crucial part of the financial world. As a metal, it has quite a few uses, such as the manufacture of jewellery and dental and medical equipment, among others. The largest producers of gold, country-wise, are Canada, China and Australia. India is the largest consumer of gold. 

Gold is often considered the best commodity to invest in as it has a high degree of liquidity and acts as security in times of an economic downturn. With inflation on the rise, more and more investors are flocking towards gold as a safe investment haven. This has taken the price of the metal up in recent times. 

  • Crude Oil

The demand for crude oil is always strong, given that it is used for the manufacture of petrol, diesel and other products in the petrochemical industry. On a global level, it is one of the major in-demand commodities as it plays an important role in economic growth and development. The price of crude oil everywhere is principally impacted by the global supply of the commodity. 

OPEC, or the Organization of the Petroleum Exporting Countries, plays a prominent role in the management of the supply and demand aspects of crude oil. OPEC supplies approximately 40% of oil on a global scale. It is also responsible for setting production quotas related to member countries of the organisation. So, when the price of oil drops, OPEC reduces the production of oil to maintain prices.

In the face of the global economic recession, oil prices could drop. However, switching to oil from gas could prove to fix the circumstances. Nonetheless, news from Goldman Sachs states that Brent crude oil (the benchmark pertaining to oil prices globally) is estimated to go up to $107/b in the next year! All investors have to do is invest and sit back in patience for potential returns! Crude oil just may be considered the best commodity in 2023 to invest in. 

  • Aluminium

Another option to consider investing in when you are thinking of commodities is aluminium. The metal is light in weight and used in a variety of industries in which the demand may be considered high in India today. Aluminium is effectively used in the industries of construction, automobiles and electronics. 

The biggest consumer of aluminium is thought to be China. Aluminium prices may be primarily affected by the demand for the metal. The cost of manufacturing aluminium also depends on oil. The present prices of electricity and power in any country may also have an impact on how much aluminium is produced. 

Commodities to Consider

By far, there are many more commodities to consider investing in, like copper and natural gas. Both these are used to power and build many other products in different industries and so, the demand for them is estimated to probably rise. Nevertheless, while thinking of any commodity to invest in, you must not forget to do some background research and invest according to your unique financial objectives. 

 

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