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.