Investment Opportunities in the 2024 Raw Material Market: How to Approach It?

The raw materials market, the heart of the global economy, is driven by complex factors such as supply and demand, geopolitical risks, and environmental changes. Many investors are interested in commodities because, despite these uncertainties, there are profit opportunities. However, the key to successful commodity investing is choosing the right investment approach.

What are commodities and why invest in them?

Commodities are resources extracted from nature or minimally processed, forming the basis of economic activity. Unlike financial assets, commodities are directly affected by real economic demand, so global economic conditions, political instability, and climate phenomena are immediately reflected in their prices.

Commodities are broadly classified into four categories. First, energy sources such as crude oil, natural gas, and coal serve as the fuel for the global economy. Next, precious metals like gold, silver, and platinum are traditionally regarded as safe assets. The third category includes base metals like copper and aluminum, which are essential materials for advanced industries and infrastructure construction. Lastly, agricultural products such as soybeans, corn, and wheat are responsible for worldwide food supply.

Commodities to watch in 2024

The duality of the energy market

Crude oil remains central to the global economy. Demand is expected to rise in line with economic recovery prospects for 2024-2025, but risks of supply disruptions due to geopolitical instability in the Middle East, the Ukraine situation, and the US presidential election persist. If producing countries tighten production policies, prices could surge.

Natural gas shows a different trend. While its importance as a clean energy source increases, prices are generally trending downward long-term. This is mainly due to increased supply from technological advances and accelerated transition to renewable energy. In 2024, seasonal fluctuations are expected, but prices are likely to remain stable.

Guardians of precious metals

Gold is a flagship inflation hedge. As global economic uncertainties persist, central banks are expected to continue increasing gold reserves, and investors’ preference for safe assets will likely continue. The long-term upward trend is expected to persist into 2024.

Silver is gaining attention from an industrial demand perspective. Its use in new technologies such as electric vehicle batteries and solar panels is increasing, boosting its investment appeal.

Essential materials in the new industrial era, base metals

Copper is highly conductive and essential for electric vehicles and renewable energy infrastructure. Considering China’s potential economic recovery in 2024, demand is expected to accelerate further.

Aluminum is experiencing a surge in demand in lightweighting industries. As the aerospace and automotive sectors, especially electric vehicles, require lighter materials, prices may rise.

Agriculture products swayed by climate and international politics

Soybeans and corn surged after the pandemic but have now stabilized. Future prices will be significantly influenced by climate change and international trade policies. Adverse weather conditions or policy changes in major producing countries could trigger sharp price increases.

Practical strategies for commodity investment: what suits you?

1. Futures trading: high rewards come with high risks

Futures involve contracts to buy or sell at a predetermined price in the future. Major products include CME’s WTI crude oil futures, COMEX gold futures, and CME grain futures.

The advantage of leveraged futures trading is that it allows handling large transaction sizes with little capital. If prices move in the predicted direction, profits can grow rapidly. Conversely, if prices move against expectations, losses can exceed the invested capital. Therefore, this approach is suitable for professional investors with deep market understanding and risk management skills.

2. Contract for Difference(CFD): a balance of flexibility and accessibility

CFD involves investing only in price movements without owning the underlying asset. You bet on whether commodity prices will rise or fall, with no physical storage hassles, lowering entry barriers.

The biggest advantage of CFDs is high liquidity. Like futures, they offer leverage, enabling large trades with small capital, and provide access to various commodities such as crude oil, gold, silver, and natural gas. Both rising and falling markets can generate profit opportunities. However, high volatility entails high risk of loss, so risk management tools like stop-loss orders(stop-loss) are essential. This is an effective choice for investors aiming to profit from short-term volatility.

3. Spot trading: the comfort of physical ownership

Precious metals like gold and silver can be owned directly in physical form. They are traded on exchanges such as the London Metal Exchange(LME) or NYMEX(, providing psychological comfort during economic downturns through tangible assets.

However, commodities like crude oil or agricultural products pose storage and transportation costs and risks of spoilage, making physical trading practically difficult. Another issue is liquidity; immediate sale may not always be possible, and storage costs can eat into profits. Therefore, spot trading is suitable for conservative investors seeking long-term value preservation.

) 4. ETFs and funds: convenient diversification

ETFs track specific commodities or groups of commodities. Examples include SPDR Gold Shares###GLD(, United States Oil Fund)USO(, and Invesco DB Agriculture Fund)DBA(. They are easy to trade like stocks, making them accessible for small investors.

Funds involve professional management and diversification across multiple commodities, so individual investors do not need to analyze markets directly. The advantages of ETFs include real-time trading and low fees. The downside is they may not fully capture sudden price swings. Funds tend to be more stable but may incur management fees and have lower liquidity. They are suitable for conservative investors aiming for long-term growth.

Comparing investment methods: risk and return spectrum

How to approach commodity investing

Investment strategies should be tailored to your goals and risk appetite.

Precious metals as safe assets are best held long-term via spot trading or ETFs. Crude oil, base metals, and agricultural products are difficult to store, so futures, CFDs, and ETFs are more practical. Properly leveraging market volatility can lead to high returns.

Beginners should start small to gain experience. First, test trading strategies with demo accounts, and when transitioning to real trading, set strict stop-loss rules to limit losses. Commodities offer high profit opportunities but also carry significant risk of loss.

Most importantly, continuous market education is vital. Understanding each commodity’s characteristics, supply-demand dynamics, and global news impacts will help make better investment decisions.