The commodities market refers to derivatives of commodities. These include financial vehicles such as options and futures. Derivatives allow investors to profit from a commodity’s value development without owning the physical commodity (e.g. instead of owning a unit of gold, an investor could own a derivative of gold). Therefore, physical commodities are out of scope in this analysis.
In general, investors worldwide are increasingly turning to Commodities as a way to diversify their portfolios and hedge against inflation and market volatility. The appeal of Commodities lies in their ability to provide a unique source of returns that is not directly correlated with traditional asset classes. The market is mainly driven by economic health, geopolitical situations, and technological innovations.
In 2023, the Commodities market generated a notional value of around US$113 trillion worldwide. Accounting for 40.09% of the Commodities market, energy product derivatives was the
largest market in 2023, generating US$42.59 trillion in notional value. In a global comparison, the United States reached the highest notional value in the
Commodities market in 2023, generating US$49.27 trillion. China came in second place with
approximately US$22.98 trillion.
In such a diverse market, there are of course also many different trends that affect it. Thanks to financial integration, energy transition, and technological innovation, the commodities market is becoming more liquid, efficient, accessible, and attractive, especially during the period of high uncertainty, and inflation. While the commodities market is growing, challenges namely inconsistent incentives, interdependent supply chains, and geopolitical turmoil make it harder to get overviews as well as precise forecasts of the commodities market.
