Commodity trading has gained immense popularity in recent times due to its diversification benefits and potential to generate decent returns. Before investing in any commodity, it is crucial to conduct a thorough analysis of the underlying factors that can impact its performance. This is where fundamental analysis comes in. As a beginner, you might be wondering how to conduct fundamental analysis for commodities.
In this article, we will explain a beginner-friendly process. You can also take a commodity trading course to get a better idea.
How to Conduct Fundamental Analysis for Commodity?
Fundamental analysis is a method of evaluating the economic, financial, and other qualitative and quantitative factors of a commodity to determine its intrinsic value. There are many online trading courses that can help you learn the nuances. Follow the steps below to conduct a fundamental analysis of commodities.
1. Understand the Commodity
The first step towards conducting a fundamental analysis of commodities is to have a comprehensive understanding of the commodity you choose. Study its uses, applications, production and consumption patterns, along with any other relevant information.
2. Consider Macroeconomic Factors
Macroeconomic indicators such as interest rates, inflation, gross domestic product (GDP), and currency movements can significantly impact the price of commodities. You should keep an eye on these indicators and analyze how they may influence the commodity you’re interested in.
3. Check Supply and Demand
The dynamics of supply and demand play an important role in determining the price of commodities. You must analyze factors such as weather conditions, crop yields, geopolitical tensions, and trade policies that may impact the supply and demand dynamics of a commodity. You can take the example of crude oil here, which got highly impacted due to tension between Russia and other countries.
4. Track Industry Trends
The commodity industry is constantly evolving, and it’s essential to keep up with the latest trends. You must track trends such as technological advancements, new production processes, and changes in regulations that may affect the commodity.
5. Evaluate Market Research Reports
Reviewing market reports and releases can provide valuable insights into the present and future of a commodity. Some examples include reports by the Multi Commodity Exchange (MCX), the International Energy Agency (IEA), The Federation of Indian Mineral Industries (FIMI) etc. Make sure you stay updated with this information for conducting fundamental analysis.
Take a Commodity Trading Course
Taking a commodity trading course can significantly help beginners in conducting fundamental analysis effectively. This full-packed course by Upsurge.club covers various aspects of commodity trading, including market basics, important data points, and terminologies.
The course is created by an industry expert, thus helping you gain a clear idea of commodity trading, which can enable better fundamental analysis. What’s more? You can complete this cost-efficient course in just under an hour. Furthermore, they show the functioning of commodity trading with a case study, which is crucial in developing a sound understanding of the commodity market.
Conducting a fundamental analysis of commodities is the first step to commodity trading. You can gain more in-depth insight into the concept through online trading courses. Upsurge.club provides a full-fledged commodity trading course that can teach you the basics of the commodity market along with case studies to polish your skills.
Also read: Options Trading: A Beginner’s Guide To Trading Options