CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

What are commodity stocks and how do you trade them?

Commodity stocks have often been likened to extracted or grown products. However, stocks and physical commodity prices move differently when trading. Discover what commodity stocks are and how to trade or invest in them with us.

Trader Source: Bloomberg

What are commodity stocks?

Commodity stocks are companies involved in the excavation or nurturing of natural resources that are processed and packaged for resale. There are two types of commodities: hard and soft.

Hard commodities are natural metals that are mined or extracted from the planet – such as gold, oil, silver and natural gas. Soft commodities are nurtured and grown raw material – such as coffee, wheat and lumber – or reared, such as hogs and cattle.

When trading, it’s important to note that the relationship between commodities and stocks is not linear. Some commodity prices have an inverse reaction to stocks, while others move in a parallel direction.

There are several factors that impact the price of the underlying commodities and stocks, such as market forces, weather patterns, and economic and political stability.

For example, when there’s a surge in inflation, commodity share prices generally come down as a response to changes to the dollar's value in the international markets.

In the same breath, you can trade or invest in commodity stocks like gold producing companies that are often used as a hedge against inflation.

Trading commodity stocks vs. commodities

Commodity trading is based on the price of the underlying commodity itself. On the other hand, commodity stocks are just linked to the physical commodity’s performance in the market.

Commodity prices are generally influenced by supply and demand, weather patterns, or economic and political changes. Getting exposure to stocks is different from taking a position on the commodity itself.

Depending on the type of commodity, the price tends to go up or down based on certain global climate changes that are conducive to nurturing certain raw materials – which sees the demand surge.

Similarly, when there’s political or economic instability or unfavourable weather conditions to crops, soft commodity share prices drop. Also, when people scramble for natural gases and precious metals during times of uncertainty – the price of hard commodities tends to rise.

You can decide to trade individual company shares, but you can also trade exchange-traded funds (ETFs) or funds that track a basket of commodity shares. While the stock price will trend based on the condition that influence the commodity, there’ll be other external factors that influence the trajectory of the company’ share price.

For example, the price of oil and stocks generally display an inverse relationship, with a rise in the commodity price linked to a weakening stock market. Typically, varying fundamental analysis metrics like price-to-earnings (PE) ratio tend to make stocks a viable hedge against changes in commodity prices.

Learn about commodities and how to trade them

How to trade or invest in commodity stocks

You can trade or invest in commodity stocks to get exposure to the company that mines or produces the raw material by using our trading or investing platforms. When you buy commodity stocks, it’s important to remember that you won’t take outright ownership of the physical gold bar or sack of rice.

With us, you’ll trade the price movement of the commodity stock using CFDs. Alternatively, you can invest and own company stocks using our share trading account.

How to trade on commodity stock with us

  1. Create an account or log in
  2. Decide if you want to trade CFDs and search for your opportunity
  3. Select ‘buy’ to go long, or ‘sell’ to go short
  4. Set your position size and take steps to manage your risk
  5. Open and monitor your position

How to invest in commodity stock with us

  1. Create an account or log in
  2. Search for the stock you’d like to invest in
  3. Select ‘buy’ in the deal ticket (you can only go long when investing)
  4. Choose the number of shares you want to buy
  5. Open and monitor your position

Buying commodity stocks with share trading

Open a share trading account to buy and hold commodity stocks and own them outright. You can make profit if you sell them at a higher price and earn dividends if the company grants them.

With us, you’ll get exposure to international stocks or ETFs with zero commission to pay on US share trades.1

Note that share trading isn’t leveraged, which means you’ll have to put up the full value of the position when opening it. When you own equity in a company, you’ll have shareholder voting rights.

Trading commodity stocks with CFD trading

With CFD trading, you’ll enter into an agreement to exchange the difference in price from the point at which the contract is opened to when it’s closed. You can go long and short to predict the direction of the underlying market price.

CFDs can be used to hedge against losses in an existing portfolio. They can also be traded on leverage to magnify your profits with just a fraction of the size value to open the position.

Remember that while leverage can amplify your profit, you stand to lose far more than your initial deposit. That’s why you need to take steps to manage your risk effectively.

Examples of commodity stocks


Freeport-McMoRan is a mining company that produces copper, gold and many other metals. In the advent of Covid-19 and the political instability that followed, the company has maintained steady growth.

Freeport-McMoRan has positioned itself as a popular stock to hedge against periods of uncertainty for a while now. Since 2016, Freeport has cut its net debt to $1 billion from $20 billion.2 Additionally, copper demand for electric vehicles is expected to rise to 1.5 million tons by 2025.3

Trade on Freeport-McMoRan stocks with us


Chevron is a titan in the energy sector, an industry that saw a surge in oil and gas prices as Europe and the rest of the world scrambled to find an alternate source for fuel after moving away from Russian provisions.

In Q2 of 2022, Chevron posted earnings of $11.64 billion in a space of three months, up from the $3.08 billion reported in Q2 of 2021.4 The performance was due to high demand in fuel, with the entire energy sector showing growth of 35%.4

Trade on Chevron stocks with us

Rio Tinto

Rio Tinto is a renowned mining firm that processes minerals such as copper, aluminium, gold and many other metals. In its 2021 annual report, iron ore was the most traded mineral ($39.6 billion), followed by aluminium ($12.7 billion) and copper ($7.8 billion).5

On 17 November 2021, Rio Tinto reported that it would invest $87 million towards its smelter in Canada to increase low-carbon aluminium production. The investment is expected to increase production at the smelter by 45%.6 If predictions are realised, Rio Tinto expects a strong performance in the 2023 financial year.

Trade on Rio Tinto stocks with us

Commodity stocks summed-up

  • Commodity stocks are companies that specialise in the extraction or nurturing of natural resources that are processed and packaged for resale
  • Trading or investing in stocks is different from the commodity itself, with certain sectors having low correlation to changes that affect the commodity
  • With us, you have two ways to get exposure to commodity stocks, via trading or investing
  • You can trade using our CFD trading account, or invest using our share trading platform
  • Commodity stocks such as Freeport-McMoRan, Chevron and Rio Tinto are just a few names that’ve been able to remain profitable in times of uncertainty

1 Note for multi-currency accounts: These figures apply to clients who opt for the default setting of 'instant currency conversion'. Clients who choose to convert currencies manually will pay commission of 2 cents per share with a minimum charge of $10 on US stocks and, for European markets, we charge £10 / €10 per trade or 0.1%, whichever is higher. Other fees and charges may apply, please refer to share trading charges.
2 Barron’s, 2022
3 Yahoo Finance, 2022
4 CNBC, 2022
5 Rio Tinto, 2022
6 Seeking Alpha, 2022

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Speculate on commodities

Trade commodity futures, as well as 27 commodity markets with no fixed expiries.1

  • Wide range of popular and niche metals, energies and softs
  • Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
  • View continuous charting, backdated for up to five years

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