Given rising inflation in the UK and around the globe, commodity trading is seeing a revival. Always in demand, commodities hold their value well and are therefore resistant to changing inflation rates.
Tradeable commodities are divided into three main categories: energy, agriculture and metals like gold. Investors can profit by purchasing commodities when they’re priced down and exchanging or selling when they have increased in value.
Are you considering getting started with commodity trading to diversify your investment portfolio? Explore the recent technological innovations that are making it easier than ever to trade basic goods.
- Blockchain technology
Exchanging basic goods between two parties – often in an international transaction – traditionally required paper trails recording agreements and authenticating the receipt of commodities and funds. This leaves room for dishonesty or delay if the trail is destroyed.
Using blockchain technology in the digitalisation of this system means that both parties have a transparent view of the history and status of each transaction while remaining confident that these details are true and tamper-proof. Eliminating the need for an impartial third party also dramatically reduces trade costs.
- Big Data Analytics (BDA)
Price forecasts for commodities are more accurate than ever thanks to Big Data Analytics (BDA). Advanced tools make it possible to read, analyse and interpret large data sets almost instantly, providing clear and correct real-time market insights based on the latest data.
This means you can be confident in your decisions when trying to purchase and sell commodities at the optimum time for maximum profit.
- Artificial intelligence
Programmes with near-human intelligence can predict trading patterns based on the previous decisions of traders in similar situations. The constant monitoring of market conditions and transactions means that these predictions are fairly reliable and also allow for the early detection of any unusual activity and nonadherence to trading regulations, mitigating potential risks.
Alongside this, the use of AI algorithms and bots in trade deals is helping to execute orders more quickly.
- Smart devices and the IoT
Just as the smartphone is inseparable from our day-to-day activities, smart devices are becoming ingrained into commodity trading to help improve the efficiency and security of the process.
Devices part of the Internet of Things – the millions of devices interlinked by the internet – with sensors and software are used to gather information and communicate this to global databases. This information helps to inform both market prices and trader decisions and forecast fluctuations in value and availability.
For example, sensors can analyse soil alongside weather information to predict crop production levels and feed this information into software which predicts value changes to agricultural goods. Traders looking to invest in agriculture can be guided by these predictions to help ensure profits and prepare for sudden downturns.
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