Best commodities to invest and trade in for 2025

Commodities explained

While stocks and forex always seem to get the lion’s share of investor attention, commodities are perhaps the most important assets worldwide. This is because commodities underpin the economic system in a fundamental way — every company in the world ultimately generates profit through the commodity chain.

Commodities are split into two segments: hard commodities are defined as natural resources which are usually mined or extracted from the ground, such as oil, gold, or copper. Soft commodities are grown and usually require maintenance during production, such as livestock, wheat, or sugar.

Investing in commodities gives investors an excellent advantage in that they provide significant diversification in a portfolio. This is because commodities’ performance historically demonstrates a low correlation with other major asset classes, such as cash, fixed income, or stocks.

In an era of increased interest rates and relatively sticky inflation, investors who have diversified through commodities have enjoyed a reasonable level of portfolio protection since the pandemic — and in many cases seen significant returns.

How to invest and trade in commodities with us

1. Learn more about commodities
2. Open an account with us or practise on a demo
3. Select your opportunity
4. Choose your position size and manage your risk
5. Place your deal and monitor your trade

You can either trade in commodities directly, or trade using spread betting or CFDs to benefit from leverage. We also offer many ETFs and ETCs that are based on commodities, and there are also thousands of commodity focused resource stocks on offer, such as Rio Tinto, Glencore and Anglo American.

Keep in mind, leverage means you can gain or lose money faster than expected. Because your position size is far greater than your deposit, you could lose more money than you put in. Be aware also that past performance is not an indicator of future returns.

Exchange Traded Commodities

Exchange Traded Commodities (ETCs) are financial instruments designed to enable indirect investing and trading on commodities, but without you having to take direct ownership.

They act as debt instruments designed to track the performance of a single commodity or a basket of commodities, making them a popular choice for investors seeking precise exposure to specific commodities. They offer a wide variety of options, ranging from hard commodities like metals and oil to soft commodities like grains and coffee.

ETCs are designed to track the price of the underlying material asset, meaning their value will be influenced by factors that affect the price of the commodity itself. For instance, when trading wheat, elements like weather patterns and crop yields can impact its price.

Some ETCs also provide leveraged or inverse exposure, catering to sophisticated trading strategies, and many come with currency-hedged options to account for foreign exchange risks.

However, ETCs do also carry counterparty risk as they are structured as debt instruments, and their returns can be eroded by costs associated with storage or rolling futures contracts, particularly for physically backed ETCs or those tracking futures. Additionally, ETCs often focus on individual commodities, which can make them unattractive to investors seeking diversification.

Commodity Exchange Traded Funds

Exchange Traded Funds (ETFs) are far better known than ETCs. While ETCs give you exposure to commodities, ETFs do the same thing but with securities instead. Like an ETC, you’re investing in or trading on a financial product that tracks the performance of underlying assets without you having to take ownership of any of them.

However, a commodity ETF will take their price from futures contracts of that commodity, rather than containing the physical asset.

Investing directly in commodities futures can be both impractical and expensive. There’s even the occasional report of a trader who has forgotten to close a futures position who is forced to take physical delivery of a commodity.

Further, futures themselves are relatively complex, typically have large contract sizes, come with margin demands, and include a component of open-ended risk that needs to be covered by the trader. This can make them unattractive to some retail investors, especially those without starting their investing journey.

Most commonly, commodity ETFs they track a benchmark index which either measures the price of a single commodity or a basket of multiple commodities. Most are synthetic ETFs which track commodity futures, and therefore may perform better or worse than the spot price of the commodity itself. Of course, some commodity ETFs will directly invest. However, this is the exception, rather than the rule.

One of their key advantages is diversification, as many Commodity ETFs invest in a basket of commodities or commodity-producing companies, spreading risk across multiple assets.

They are also highly liquid, trading like stocks on major exchanges, and physically-backed ETFs eliminate counterparty risk by holding the underlying commodity directly. Additionally, ETFs can offer tax benefits depending on their structure and jurisdiction. However, Commodity ETFs may face tracking errors, particularly when investing in futures or related equities, as these assets don’t always perfectly mimic commodity price movements.

Furthermore, expense ratios for ETFs can be higher compared to ETCs, and their indirect exposure may dilute the pure impact of commodity price changes due to broader market trends.

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.

Top commodities to watch in 2025

Some of the best performing commodities in 2024 were:

• Cocoa (+185%) — The best performing commodity of 2024, driven up by adverse weather conditions in key West African producing nations, particularly strong Harmattan winds leading to drier climates, reduced cocoa yields. This region accounts for approximately 75% of global cocoa bean production
• Eggs US (+107%) — Mass outbreaks of avian influenza led to substantial reductions in the population of egg-laying hens, decreasing egg production and creating a supply shortage
• Coffee (+72%) — Climate change-induced weather anomalies, including droughts and unseasonal frosts in key coffee-producing regions like Brazil, disrupted coffee bean production through 2024. Additionally, coffee is seeing increased global demand from emerging markets
• Orange Juice (+65%) — Multiple hurricanes alongside persistent citrus greening disease has led to a significant decline in orange production, reaching the lowest levels in over 80 years.
• Germanium (+89%) — Geopolitical tensions and export restrictions from China has created supply uncertainties for germanium, a rare earth element used in electronics and renewable energy technologies.
• Gold (+28%) — General economic uncertainty and relatively elevated inflation has seen investors seek safe-haven assets over 2024, increasing demand for gold. Central banks have also continued to buy the precious metal at a near record pace

Some of the worst performing commodities in 2024 were:

• Iron Ore (-23%) — A slowdown in China's construction and manufacturing sectors has led to reduced demand for steel, significantly decreasing iron ore demand. Worse, increased production from major mining companies has contributed to an oversupply, and new large mines are expected to start producing next year
• Soybeans (-24%) — Favourable weather conditions in major producing regions saw bumper soybean harvests in 2024, leading to an oversupply in the market. At the same time, reduced demand from key importers and increased competition from alternative oilseeds created am effective market glut
• Cotton (-15%) — Shifts in consumer spending patterns led to decreased demand for textiles and apparel last year, while high inventory levels from previous years’ harvests led to oversupply and falling prices

Best commodity ETFs and ETCs to watch in 2025

Below is a selection of several popular ETFs and ETCs:

• Invesco Physical Gold GBP Hedged ETC — provides investors with exposure to the price of gold by holding allocated gold bullion held in JP Morgan vaults in London. This ETC closely tracks the spot price of gold and is backed by physical gold bars, making it a cost-effective way to invest in the metal while avoiding the complexities of futures contracts
• Invesco DB Agriculture ETF — offers exposure to a diversified portfolio of agricultural commodities, including cocoa, corn, soybeans and wheat, by tracking the DBIQ Diversified Agriculture Index. It provides investors with a way to hedge against inflation or gain exposure to the agricultural sector
• WisdomTree Cocoa ETC — is a fully collateralised product designed to provide exposure to the price of cocoa by tracking cocoa futures contracts. It enables investors to participate in the cocoa market without the need for direct trading or storage, making it ideal for those seeking targeted exposure
• WisdomTree Physical Silver ETC — provides direct exposure to silver by holding physical silver bullion stored in HSBC Bank vaults. It tracks the spot price of silver and is fully backed by allocated silver, offering a convenient way to invest in the metal without needing to handle or store the metal, which is a significant plus given the amount of silver a silver bug tends to hold
• WisdomTree WTI Crude Oil ETC — offers exposure to the performance of West Texas Intermediate crude oil prices by tracking front month crude oil futures. This ETC effectively allows investors to gain targeted exposure to oil price movements without directly managing futures contracts

Best commodities summed up

• Commodities underpin the economic system in a fundamental way; every company in the world ultimately generates profit through the commodity chain
• Hard commodities are defined as natural resources which are usually mined or extracted from the ground, such as oil, gold, or copper. Soft commodities are grown and usually require maintenance during production, such as livestock, wheat, or sugar
• You can either trade in commodities directly or trade using spread betting or CFDs to benefit from leverage
• We also offer many ETFs and ETCs that are based on commodities, which allow you to invest or trade without directly holding the asset