Commodities
How commodities like oil, copper and uranium are priced, why they move in cycles, what futures roll costs are and when they belong in a portfolio.
Commodities are raw materials: energy (oil, gas), industrial metals (copper), agricultural products and specialised markets such as uranium.
What drives them
Supply and demand, directly. Global growth, inventories, production decisions (OPEC+ for oil), weather, geopolitics and the US dollar all play a role. Because supply takes years to adjust, prices move in long boom-and-bust cycles.
Not a buy & hold asset
Unlike companies, commodities do not grow or pay income. Over long periods, buy & hold in many commodities has gone nowhere or lost money, while their big trends — up and down — have been powerful. That is why commodities are a natural fit for trend-following rather than permanent holdings.
How to invest
Most commodity funds hold futures contracts, which must be rolled before expiry. Depending on the market structure this roll can cost or earn money every year, so the fund's return can differ from the spot price. Funds like DBO use an optimised roll to reduce this cost. Commodity producers' stocks are an alternative with stock-market risk added.
Role in a portfolio
Commodities have tended to do well in inflationary periods, when stocks and bonds struggle — a valuable diversifier when held with a clear rule for entry and exit.
Markets in this asset class
Put it into practice: a free account unlocks equity curves and signals for six core markets and the full glossary.
🔒 Open free accountEducational content, not investment advice. Disclaimer.