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At NexxtGen Group, we are dedicated to pioneering solutions and delivering excellence across a diverse range of industries. With our multidisciplinary approach, we provide unparalleled services in Financial Markets Trading & Investment, Technology, Football, and Climate.

Commodities

Commodities markets are where raw or primary products are exchanged. These markets include physical commodities like metals, energy, agricultural products, and livestock. Commodities are traded on spot markets for immediate delivery and futures markets for delivery at a later date. The commodities markets play a crucial role in the global economy, influencing production, consumption, and pricing strategies.

Types of Commodities
 

  1. Energy
     

    • Crude Oil: One of the most actively traded commodities, crude oil is crucial for energy production and transportation. Key events include the 1973 oil embargo and the 2020 price collapse due to the COVID-19 pandemic.

    • Natural Gas: Used primarily for heating and electricity generation. The shale gas revolution in the early 21st century significantly increased supply.

    • Coal: Traditionally a key energy source, now increasingly scrutinised for its environmental impact.
       

  2. Metals
     

    • Gold: Often seen as a safe-haven asset. Historical events include the end of the Gold Standard in 1971 and the surge during the 2008 financial crisis.

    • Silver: Used both as an investment and in industrial applications. Notable events include the Hunt Brothers' attempt to corner the market in 1980.

    • Copper: Essential for electrical equipment manufacturing. Prices are often a barometer of economic health.
       

  3. Agricultural Products
     

    • Wheat: A staple food commodity with a history of price volatility due to weather conditions and geopolitical events.

    • Corn: Used for food, animal feed, and biofuel. The U.S. is a major producer, and changes in ethanol policy can significantly impact prices.

    • Soybeans: Crucial for livestock feed and oil production. Trade tensions, especially between the U.S. and China, can affect market dynamics​
       

Instruments in Commodities Trading
 

  1. Futures Contracts
     

    • These are standardised agreements to buy or sell a specific quantity of a commodity at a predetermined price at a future date. They are traded on exchanges like the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE).
       

  2. Options on Futures
     

    • These give the buyer the right, but not the obligation, to buy or sell a futures contract at a specified price before a certain date. They offer leverage and risk management opportunities.
       

  3. Spot Contracts
     

    • These involve the immediate purchase or sale of a commodity for cash payment and delivery.
       

  4. Exchange-Traded Funds (ETFs)
     

    • These funds track the price of a specific commodity or a basket of commodities. They provide an accessible way for investors to gain exposure without directly dealing with the complexities of futures trading.
       

  5. Commodity Swaps
     

    • Over-the-counter derivatives where two parties exchange cash flows based on commodity prices. These are typically used by producers and consumers to hedge against price risk.
       

Notable Historical Events
 

  1. The Oil Embargo of 1973
     

    • Led by OPEC, this event caused oil prices to quadruple, leading to economic recessions in many countries.
       

  2. The Hunt Brothers Silver Cornering (1980)
     

    • An attempt by Nelson Bunker Hunt and William Herbert Hunt to corner the silver market led to a dramatic spike and subsequent crash in silver prices.
       

  3. The Shale Gas Revolution
     

    • Technological advancements in hydraulic fracturing and horizontal drilling significantly increased natural gas production in the U.S., affecting global energy markets.
       

  4. The 2008 Financial Crisis
     

    • Led to a surge in gold prices as investors sought safe-haven assets, highlighting gold's role in times of economic uncertainty.
       

Trading and Investment Disclaimers


Please note that trading and investing in commodities involve substantial risks, including the risk of loss. The information provided here is for informational purposes only and should not be considered as investment advice. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions.
 

For detailed risk information, please visit our risk page at nexxtgen.pro/risk.

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NexxtGen Group

c/o Steve Halls

Level One, 80 Fenchurch Street, London EC3N 2ER

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