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Benefits of Commodity Trading

Hedging: Commodity trading is a useful tool for producers where they can hedge their exposure in any physical commodity at the exchange platform.
Diversification: Adding commodities to a portfolio may enhance risk-adjusted returns as commodities generally have low or negative correlation with many asset classes. Other factors constant, well diversified portfolios with low correlated assets tend to have lower volatility of returns. Gold has been amongst the top performing commodities in last decade, giving a decent return with low volatility.
Hedge against Inflation: Inflation affects investors as it erodes the value of the money held by them. However, it tends to affect commodities contrarily from other financial products. Investment in commodities generally benefit from an inflationary environment.
Hedge against Event risks: Geo-political events like wars and supply glitches due to natural calamities like droughts and floods generally hamper profitability of companies but may impact the supply of, and increase the demand for, certain commodities. Holding commodities in a portfolio may offer a potential hedge against many event risks.
Price Discovery: Commodities are traded on exchanges which execute a transparent process of trading between various participants. Fair price discovery is ensured through large-scale participation of different kinds of participants like hedgers, arbitrageurs and speculators. The large participation warrants views and expectations of a wide section of people concerned with that commodity.
Significant part of economy: India is among the top-5 producers of most of Agri commodities, in addition to being a major consumer of bullion and energy products. Agriculture contributes about 15% to the GDP of Indian economy.

Benefits of Commodity Trading

Hedging: Commodity trading is a useful tool for producers where they can hedge their exposure in any physical commodity at the exchange platform.

Hedge against Inflation: Inflation affects investors as it erodes the value of the money held by them. However, it tends to affect commodities contrarily from other financial products. Investment in commodities generally benefit from an inflationary environment.

Significant part of economy: India is among the top-5 producers of most of Agri commodities, in addition to being a major consumer of bullion and energy products. Agriculture contributes about 15% to the GDP of Indian economy.