For Hedging Purposes
Commodities are considered a good hedge against geopolitical uncertainties. Geopolitical events such as political tensions, riots, wars, or even natural disasters cause a disruption in the supply chain. In many instances, this may lead to a scarcity of resources. This puts upward pressure on the price of various commodities. Traders can hedge geopolitical risks by including commodities in their trading portfolio.
Take Advantage of High Leverage
Now that commodities trading can be done via derivatives like CFDs, traders can choose to use high leverage offered by online brokers. Leverage allows traders to take big positions in their chosen securities by paying only a very small part of the total trade value. Leverage offers traders the opportunity to magnify their profits with a low capital investment. Just like forex, a small increase in the price of the underlying commodity can return an investor a lot of money.