## Want to participate in commodity investing? Understand these 6 selection criteria first

Commodities, like stocks and bonds, are important asset classes in the global investment market. Their biggest advantage is high liquidity and close ties to economic cycles, with price fluctuations often accurately reflecting the state of the global economy. However, not all commodities are worth investing in; the key is to choose the right types.

## What exactly are commodities?

Commodities are bulk, non-retail physical goods with practical value. Their defining characteristic is a "large" aspect—large supply, large demand, and high circulation. Because of this, commodities are usually positioned upstream in the supply chain and have a broad impact.

Currently, the main categories of commodities in the market are: **Energy (crude oil, natural gas), Industrial metals (copper, aluminum, iron ore), Precious metals (gold, silver), Agricultural products (soybeans, corn, wheat), Soft commodities (sugar, cotton, coffee), Livestock (pork, beef)**.

Among them, crude oil is known as the "King of Commodities"—its downstream products include plastics, textiles, fuels, and other daily necessities, with huge supply and demand. Gold and silver are valued for their non-perishability and ease of storage, serving as hedges and stores of value.

## Which commodities are worth your investment?

In theory, there are many categories of commodities, but in practice, participation is limited. For example, electricity has high demand but is geographically restricted, with prices locked regionally, making it difficult for ordinary investors to participate. So, how to select? These 6 dimensions are crucial:

**High liquidity** — Only commodities with active trading and ample capital, with transparent pricing and less manipulation, are suitable. Crude oil, copper, gold, soybeans, etc., meet this criterion.

**Global uniform pricing** — Listed on multiple international exchanges, facilitating global participation. For example, crude oil and gold have a unified market reference price worldwide.

**Ease of storage and transportation** — Metals and grains are less affected by regional climate and are easy to store long-term.

**Standardized quality** — Regardless of where they are produced, quality is strictly controlled. Gold and crude oil meet these standards.

**Stable and broad demand** — Long-term, stable demand worldwide, such as for oil, natural gas, wheat.

**Accessible information** — Transparent fundamental data, making it easier for investors to judge price trends based on economic logic.

Considering these conditions, **crude oil, copper, aluminum, gold, silver, soybeans, corn, sugar, cotton** are the top choices.

## When is the best time to enter commodity investments?

A key investment timing is when major global economies resonate in cycles. After the 2020 pandemic outbreak, central banks worldwide implemented quantitative easing policies, leading to inflation with "more money than goods," causing a large-scale rally in commodities. This is a typical example driven by global liquidity.

## How to participate in commodity trading?

For beginners, the most direct way is through **commodity futures** and **options** trading.

Futures contracts have specific underlying assets; for example, crude oil futures are based on crude oil. But the key is understanding the **contract expiration month**—futures prices are essentially market predictions of the spot price at a future date. You need to forecast the spot price trend at that time to make accurate decisions.

## Fundamental and technical analysis, both are essential

The core factors influencing commodity prices are macroeconomic environment, supply, and demand—these are part of **fundamental** analysis. Fundamentals determine long-term trends and price ranges.

But fundamentals alone are not enough; **technical** analysis is also needed—using tools like candlestick charts and moving averages to precisely identify buy and sell points. Combining both is the best approach: fundamentals provide directional guidance, while technicals offer entry points; technical signals should also be interpreted within the context of fundamental trends to assess how long the trend can last.

## Summary: The correct approach to commodity investment

Commodity investment is essentially a re-pricing of the global industrial chain and is as important as stocks and bonds in asset allocation. To succeed, you need to: select the right types (prioritize liquid, globally priced mainstream commodities), seize the timing (capitalize on global liquidity resonance), and combine fundamental and technical analysis to grasp opportunities and manage risks. Remember, commodities like crude oil, copper, aluminum, gold, silver, soybeans, corn, sugar, and cotton are key assets worth paying close attention to.