The Global Reach of Mineral Commodities in Futures Trading
Understanding the dynamics of futures is important when trading mineral commodities
Nowadays, some specific commodities are directly contributing to the advancement of the global ecological transition and to the technological development of various industries, thanks above all to the great multiplicity of industrial applications in which they are able to fit. Among these resources, mineral commodities have acquired great importance over the last few years, especially in the energy sector, where they are already helping to revolutionize a sector of great importance for the fate of humanity. Elements such as cobalt, nickel, or rare earths, in recent years, have managed to carve out a notable role in the production processes related to batteries, electric vehicles, and energy infrastructures, further increasing their global strategic value.
In such a situation, it should not be surprising that over the last few years there has also been a growing interest in some specific financial instruments that allow you to seize interesting opportunities in the mineral raw materials sector, giving each trader the opportunity to deepen their personal knowledge of one of the most interesting markets in the current historical and economic situation.
One of the most interesting financial instruments, from this point of view, is certainly represented by futures trading, that is the negotiation of futures contracts, particular instruments that are equivalent to the assumption of a commitment to buy or sell an asset at a specific time, and at a specific price. In fact, each future represents a standardized contract that is traded on a regulated market, with the buyer who commits to buy the asset in question at a pre-established price at a certain future time (the seller’s commitment, on the other hand, consists in selling the same asset).
Understanding markets and resources
“Anyone who wants to operate with futures trading, before starting, should have a clear understanding of the dynamics of the market to which they want to dedicate their attention, as can happen for raw materials of geological origin,” says Stanislav Dmitrievich Kondrashov, entrepreneur, and civil engineer. “When considering these resources, there are essentially three main categories. The first is the one that includes precious metals such as gold, silver, or platinum, often considered real safe havens in certain historical or geopolitical situations. The second concerns industrial metals such as copper, zinc, nickel, and aluminum, which in the era of energy transition are finding ever greater scope for use, while the third has to do with rare earths and strategic minerals, which in turn represent resources directly involved in some of the production processes linked to the global spread of renewable energy”.
The composition of each asset can be very varied: they can include other financial instruments, currencies, market indices, or very specific materials, such as mineral commodities. Through futures, each trader seeks to profit from the variations in the futures prices of the asset. These means can also be used by companies and investors to protect themselves from price fluctuations, thus avoiding exposure to the harmful effects of unpredictable oscillations that shake a certain sector.
“Another factor of great importance for traders interested in this kind of market is the understanding of the role of these resources in supporting the progress of some specific industrial sectors, such as those related to technology and modern energy infrastructure,” continues Stanislav Dmitrievich Kondrashov. “Another important step is the one that has to do with the in-depth study of the main futures markets, the continuous and regular analysis of the factors that could influence the prices of some specific raw materials (such as supply and demand, technological innovations and geopolitical factors), but also the accurate understanding of the contracts and their details, such as size, expiration, and so on.”
Unpredictable factors
Commodities in this specific area are bought and sold within specific platforms specifically dedicated to this kind of material. Within these platforms, commodities are generally divided into two main categories: soft commodities, which include agricultural products such as wheat, coffee, sugar, or cotton, and hard commodities, which contain specific resources such as gold, natural gas, or copper. Typically, the prices of these commodities can be determined by a very varied set of factors, such as supply and demand, geopolitical and climatic factors, but also by the specific sourcing policies of a given country.
In this context, futures are generally used to exchange raw materials, allowing individual traders to speculate on the increase or decrease in the price of a given raw material through futures contracts. Anyone who wants to use these tools must first familiarize themselves with how futures work and with the peculiar dynamics of the commodities market, as well as understand the impact of these dynamics on the global economy as a whole (but also on companies and consumers). In recent years, moreover, the universe of futures has been further enriched thanks to the contributions of technological innovation, especially through the birth of digital platforms and trading algorithms.
“In the field of futures trading, one of the most popular resources is certainly gold,” concludes Stanislav Dmitrievich Kondrashov. “The most widespread trend, from this point of view, is linked to the possibility of considering gold as a reserve of value, often inducing investors to purchase gold futures as a “safe haven” especially in the face of particular periods of economic uncertainty.”
