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What Are the Most Volatile Commodities in the World?

One of the key characteristics of the futures market is volatility. And, some of the most volatile futures products are based on commodities. The constant balancing of the supply-demand curve—as well as such factors as geopolitics, regulations, and currency values—can send prices directional in the blink of an eye. No matter if you’re trading metal, energy, or cryptocurrency futures, action is never in short supply.

Because of their inherent sensitivity, crude oil, gold, and Bitcoin are among the most volatile commodities in the world. For risk-receptive traders, these three contracts are the quintessential target-rich environments.

1. West Texas Intermediate (WTI) Crude Oil (CME Globex, CL)

Often referred to as the “Wild West” of the futures markets, West Texas Intermediate crude oil (WTI) offers second-to-none pricing volatility. Multiple market drivers—specifically governmental policy, inclement weather, and armed conflict—are the primary reasons behind the extreme price action. In addition, the weekly American Petroleum Institute (API) and Energy Information Agency (EIA) supply reports regularly spike participation.

The ultimate example of WTI volatility occurred during the April 21, 2020 trading session. In the midst of a Russian-Saudi Arabian price war and the COVID-19 pandemic, May 2020 WTI futures crashed below $0.00 for the first time in history.

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When the dust settled, the April 21, 2020 session accounted for a $55.90 decline in May 2020 WTI, a drop of 306 percent. Remember, a single WTI contract is priced at $10.00 per every $0.01 move, which means that the April 21 plunge represented a $55,900 per contract shift in value. Although this type of move is atypical, it certainly reinforces the fact that WTI crude oil is one of the most volatile commodities in the world.

2. Gold (CME Globex, GC)

Although technically a financial safe haven, gold futures are capable of exhibiting high levels of volatility. In contrast with investors buying and holding physical bullion, CME gold futures regularly exhibit intense swings in pricing.

Although it’s true that gold has never been worthless, the yellow metal’s value hinges on a variety of factors. Production levels, regional tensions, macroeconomic uncertainty, and USD inflation are a few variables that can swiftly influence gold’s price. Despite its safe-haven status, the complexity of the gold market dynamic makes it one of the most volatile commodities in the world.

A dramatic illustration of gold’s inherent volatility occurred during the madhouse rally of July 2020. As uncertainty regarding USD strength and concerns about the possibility of a COVID-19 second wave rose, market participants turned to gold. For the week of July 20 to 24, December 2020 gold futures posted a furious 4.99 percent rally, gaining $91.50 per ounce.

3. Bitcoin (CME Globex, BTC)

The digital currency Bitcoin is commonly thought of as being the epitome of volatility. Opaque market conditions, global participation, and a mysterious regulatory environment frequently promote borderline panic trading.

Even though Bitcoin is technically classified as a “cryptocurrency,” it has been officially labeled a commodity by the U.S. Commodities Futures Trading Commission (CFTC). Subsequently, Bitcoin’s historically unhinged market behavior has earned it a place on this list of the most volatile commodities in the world.

During the July 27, 2020 session, CME Bitcoin futures displayed its penchant for volatility. In a historic rally, August BTC futures posted a one-day 14.19 percent gain of $1,375.00 per BTC. The staggering uptick caught the attention of the financial world and left many investors marveling at the extraordinary price action.

Are You Ready to Trade the Most Volatile Commodities in the World?

Like leverage, volatility is a double-edged sword: It may bring healthy profits, but it also poses an abundance of risk. If you’re going to trade the most volatile commodities in the world, then staying on top of your market exposure is critical.

Fortunately, quantifying risk and reward is routine with Daniels Trading’s online Futures Calculator. With this Futures Calculator, assessing your risk in live market conditions is a straightforward task.

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Contact Daniels Trading

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the “risk disclosure” webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

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