Best Commodity Brokers for 2024

Since farmers started trading wheat, eggs and butter on the Chicago exchanges in the nineteenth century, commodity brokers have been arranging trades. Traders soon entered the market and began to trade on a purely speculative basis, never taking ownership of the underlying commodities. Commodity brokers continue to act as the middlemen between hedgers and speculators in exchange for a commission.

Today, online commodity brokers allow anyone to trade commodities from a desktop trading platform or mobile app. Many online brokers offer a broad range of commodities to trade: metals (gold, silver), energy (oil, gas), and agricultural products (soybeans, wheat, corn, sugar, coffee). These online trading platforms sell financial contracts, called commodity derivatives, whose value is based on an underlying commodity. They allow traders to profit from price changes in the commodity without ever taking ownership. 

For a detailed list of what commodities are, check our guide here.

The Top 4 Online Commodity Brokers

If you don’t have time to read our guide in full, here’s a quick look at the very best commodity brokers on the market today.

1. AvaTrade – Commodity broker with MT4/5
2. Investous – Options and spread betting on commodities
3. Plus500 – CFD broker with tight spreads
4. Libertex – Renowned US commodity broker

How to Choose a Commodities Broker

There are a great number of commodity brokers in the market, so how do you choose the best one for you? Some are focused on low fees, whereas others give more weight to trading charts and indicators. More experienced traders may want to work with brokers that give them higher leverage or a wider choice of investments. The commodity broker you choose should align with your investment experience, risk profile and trading strategy.

To help you out, we have reviewed the major CFD brokers, comparing their features and identifying the pros and cons of their platforms.

Best Commodity Traders for 2024

How to Trade Commodities

If you want to trade commodities online, the first step is to choose the type of contract you want to trade. Most commodities are traded using contract for differences (CFDs) or futures contracts. Both these instruments allow you to make bets on the future price of a commodity.

Contract for Differences (CFD)

Most of the commodities brokers in the market operate through CFDs. CFD stands for “Contract For Difference”, and are basically financial derivatives that enable retail investors to speculate on the price movement of stocks, bonds, and commodities, without owning the underlying asset.

CFDs are a favorite for most investors as they allow them to increase their exposure to the asset by leverage. Bear in mind, however, that CFDs are complex products with a high risk of losing or gaining money quickly. The risk factor is evidenced by the fact that between 74-89% of retail investor accounts lose money when trading CFDs. You, therefore, are better off investing with an investment firm or stock broker that has both the trading experience and advanced risk management tools.

Futures

These exchange-traded contracts provide the right to buy or sell a commodity at a fixed price and future date (1 month to years in the future). At contract expiration, the buyer purchases and the seller sells the underlying commodity. The contract terms—contract size, price and delivery date—are standardized.

Since CFDs allow investors to increase their exposure to assets through leverage, bear in mind that they are complex products with a high risk of losing or gaining money quickly. Between 74—89% of retail investor accounts lose money when trading CFDs.

Regulated vs Unregulated – Commodity Broker Licenses

Before investing in commodities, or any other financial instrument for that matter, you should conduct research to ensure that your online commodity broker is fully regulated. Brokers have to adhere to financial rules established by government agencies, which include having customer safeguards like fund protection, maintaining capitalization and being subject to regular audits. Your online broker should also have licenses from one of these agencies, which guarantees a higher level of reliability.

The CFD is a particularly popular security sold by unregulated brokers. Opening an account with an unregulated online broker is assuming a great deal of risk, as these brokers could close down overnight and disappear with customer funds. As they operate online, they could be hard to prosecute due to their tendency to locate in hard-to-pursue jurisdictions. You should also keep an eye on fraudsters that claim to be licensed by fictitious agencies. Always do your due diligence before investing money.

Qualifications for Commodity Brokers

Choosing a broker whose services are aligned with your experience and investment goals can make the difference between meeting and falling well short of your investment objectives. Beginners may want simplicity and an easy-to-use interface, while others may want lower fees and higher leverage. Other traders may seek a wider number of investment options, advanced charting or responsive customer service.

Each of these commodity brokers can offer a unique value proposition to the commodity trader, depending on your trading and investment objectives.

Commodity Price Forecasting & Research Tools

When shopping around for the best commodity broker, investors too often pay scant attention to the research offerings. A commodity trading broker with abundant investment research offerings could significantly improve your investment returns. After all, knowledge is power. Good research resources are all the more important in the commodity markets. Many factors affect commodity prices, and each commodity has its own unique factors influencing its value.

Unless you are investing in a company focused on a commodity sector, you will not find historical performance data and forecasts conveniently provided in an earnings report. Instead, you will need to search wider for information affecting say oil, gold, wheat or platinum prices. Following are some of the key research resources used by commodity traders and provided by many online commodity brokers.

Economic calendar – Keep an eye out for major monetary policy announcements, as economic growth will affect the price of all commodities. Some key numbers to watch out for include:

GDP – Cyclical commodities like metals (copper, platinum) tend to decline with economic growth. Gold is an exception. When economic growth slows investors rush to gold as a flight to safety. Non-cyclical commodities like electricity and gas will not be affected by economic cycles since they are a necessity. Oil prices, on the other hand, will fall as economic activity declines.

Interest rates – Generally, when interest rates rise commodity prices decline. Gold as a traditional store of value is particularly sensitive to interest rates. When interest rates are low, investors put money in gold. Whereas when interest rates rise, investors move their money into higher interest-bearing securities.

Inflation – Rising inflation will increase the price of gold and other precious metals. Oil has such a strong influence on economies that it controls inflation. Falling oil prices will push down inflation.

Currencies – Many commodities are exported and therefore their prices are affected by currency exchange risk. While trading commodities, you may also want to make use of the foreign-exchange correlations provided on the trading platform. Currencies of countries with high oil exports, for example, are sensitive to oil prices.

General News – In addition to economic news, geopolitics influences the prices of many commodities. Since several large oil-producing countries dominate oil production, political conflict in these regions affects oil prices. A prime example is the fall in oil production and rise in prices during the Gulf War in 1991. Some commodity brokerage platforms will provide access to Bloomberg, Reuters and other business and financial news sites.

Analyst reports – Others will offer full research support, including analysts reports, full access to Morningstar, Bloomberg, and so on. Commodity traders should understand the supply and demand dynamics of the commodities they invest in. Expert industry analysis can provide unique insight. Formerly one could trade corn based on agricultural reports. Since corn is now an important commodity in fuel production, you may also want to know how clean fuel demand and ethanol taxes will affect corn prices.

Industry news/reports – All commodity sectors publish supply and demand forecast reports. If investing in platinum, for example, you may already follow auto production news, but likely need to turn to industry reports to understand how China chemical production and LCD glass demand will affect platinum prices.

A useful complement to commodity news and research are alerts to apprise you of important news. A good commodity broker set up will allow you to intuitively integrate all these tools into your trading environment to gain an investment edge.

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