The Best Commodities to Trade in India

Commodity trading is a great way to diversify your portfolio. Investing in commodities, aside from stocks or foreign currencies, allows you to manage risk without sacrificing much in terms of returns—especially during rising inflation and threats of recession. As a result, you’ll have a better chance of attaining financial security despite these uncertainties.

Despite this, you shouldn’t haphazardly choose the commodities you should trade or invest in. While there is a wide range of financial instruments that you’ll encounter when you trade commodities, you must be careful with the commodities you choose.

After all, commodity prices are typically affected by several factors, including supply and demand, economic performance, and political stability. Given these, it’s important to trade assets with which you can profit from the most.

For instance, precious metals are popular commodities to trade since they have a limited supply and constant demand, meaning they’re easy to buy and sell—even during periods of recession.

Now that you know this, here are some of the best commodities to trade in India:

Gold

Gold is a precious metal used for many purposes. It is used in coins, turned into bars, and incorporated into electronic components and jewelry. Because of this, there is always a demand for gold—especially in India.

Although its demand declined from April to June because of record-high rupee gold prices, the festive season spanning September to December usually brings back its high demand due to cultural reasons, like being worn as jewelry at weddings.

More recently, many people are buying gold because of rising income levels and the increasing purchasing power among the buyer class. The more people demand and buy gold, the higher its price. In addition, you can rest assured that it can retain its value during inflationary periods.

Silver

Next to gold, silver is a top commodity to trade in India. Since it’s a precious metal, it exhibits the same qualities as gold in terms of high demand and retaining its value during unstable economic conditions.

Besides these, the demand for silver is growing in India because of its industrial properties. It has the highest electrical, thermal, and reflectivity values compared to other metals. As a result, 55% of silver in India is now used for industrial applications, only 19% is used in jewelry, and 12% is used for coins and metal. This shows how silver has several uses in India, making it one of the best and most in-demand commodities to trade.

Natural gas

Natural gas is used for boilers, air conditioners, and making fertilizers. This makes it a highly liquid commodity with a high trading volume. In India, the fertilizer sector is the largest gas consumer because of the ramp-up of new fertilizer plants commissions in Fiscal Year 2023.

Due to this, India’s natural gas consumption is expected to grow by 6-7% year-over-year in Fiscal Year 2024. The country is also seeking to import more volumes of natural gas as part of its emergency steps to address electricity outages.

This boosts the country’s demand for natural gas, further increasing the country’s consumption of this commodity. As this continues, traders can expect natural gas to remain among the best commodities to trade.

Cotton

India is the world’s biggest producer of cotton. The country is set to produce 34.4 million bales of cotton this year—12% more than in the previous years—thanks to farmers expanding their crop areas by 10% in 2022.

Ultimately, this means per-hectare yields are also likely to rise. This larger output points to more exports and consumption in the near future—and with India producing more of this fiber than any other country, this makes cotton one of the best commodities to trade.

While commodities trading is a great way to diversify your assets and reduce risk, trading only the best commodities is essential. This way, you can ensure a greater chance at profit despite economic fluctuations.