Commodity Investing Australia – Beginner’s Guide 2021

Fact Checked by Gary McFarlane

Commodity investing involves buying and selling goods such as oil and gas, precious metals like gold and silver, and agricultural commodities including wheat, coffee, and livestock. 

If you’re looking to trade commodities, you’ll find a wide range of markets readily available on your mobile device. But what does commodity investing involve, and how do you hedge against potential risks? Read on to find out. 

#1 Broker for Commodity Investing Australia – eToro

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Commodity Investing Australia – Step-by-Step Guide 2021

Wondering how commodity investing works? Here’s our quick and easy guide to investing in commodities with eToro in 2021.

  1. Create an eToro brokerage account by clicking on ‘Join Now’ via the eToro site. Select a username and password and enter some personal details.
  2. Verify your Account – Verifying your trading account is straightforward. Simply upload a copy of your passport and a recent utility bill and you’re good to go. 
  3. Fund your Account – Make a $50 minimum deposit via a credit/debit card, a bank transfer, or an e-wallet including PayPal and Skrill. 
  4. Trade Commodities  – Decide whether you’ll buy or sell your preferred commodity CFD. Expert traders go long if they speculate the price of the underlying commodity will rise. Alternatively, they’ll go short if they believe the market price will drop. Once you’ve found the commodity you want to trade, enter a trade size, choose the amount of leverage, place any stop-loss orders, and click open trade to seal the deal. 

If you’re interested in forex investing Australia, you can read our in-depth guide for everything you need to know in one convenient place. 

Best CFD Broker for Commodity Investing in Australia 

Whether you want to buy cryptocurrency in Australia, invest in ASX Australia, or if you’re on the hunt for the best shares to buy you’ll need to open a trading account with the best trading platform in Australia

We’ve spent the time researching and reviewing the best CFD brokers across the board so you don’t have to. As such, we found eToro, AvaTrade, and Capital.com to be the best options out there in 2021. 

1. eToro – Best CFD Broker with 0% Commission and Copy Trading Tools

Commodity investing with eToro

eToroeToro is one of the top-rated trading platforms for passive investing in Australia. After it made its debut in 2006, eToro is now home to over 20 million traders. Thanks to its growing popularity, this copy trading platform is authorized and regulated by several top-tier financial authorities. 

These include the UK’s FCA, ASIC, and CySEC. With such high regulatory compliance, it’s clear to see why so many people trust eToro with their investments. 

Assets

When looking for the best online broker to trade commodities with, one of the key questions you’ll need to ask is ‘what assets can I trade?’. With this in mind, eToro offers real stocks and ETFs, along with CFD instruments and copy trading features. You’ll also be able to buy Bitcoin in Australia as eToro supports cryptocurrency trading. 

Commodity investing - eToro

Fees

eToro is a leading free trading platform. This means you won’t pay a penny in commissions when trading stocks and ETFs. In terms of commodity CFD trading, eToro charges spreads and overnight fees for any positions held open after the market closes.

General fees – There are no deposit fees or account fees when trading with eToro. On the flip side, this broker charges a competitive fixed fee for withdrawals to cover some of the costs from international money transfers. This stands at $5 per withdrawal and the minimum withdrawal is just $30.  

Withdrawals and deposits are made in USD. Other fiat currencies are subject to a conversion fee of 50 Pips (percentage in point). 

After 12 months of no login activity, a $10 inactivity fee is charged monthly. 

Payments

eToro supports a wide range of payment methods including debit cards, credit cards, e-wallets, and bank transfers. The minimum deposit is just $50. 

Fee Type Fee Amount
Commission 0% on Stocks and ETFs
Spread Fee Variable low spreads
Deposit Fee $0
Withdrawal Fee $5
Inactivity Fee $10 after 1 Year
Account Fee None
Oil Spread 5 Pips

Pros

  • Competitive fees
  • Best Trading App in Australia
  • Tight spreads
  • Copy trading tools
  • Heavily regulated by ASIC, FCA, CySEC
  • Wide range of asset classes
  • Commission-free exchange-traded funds, and commodity ETFs
  • Trade real stocks listed on 17 international markets including the New York Stock Exchange, and LSE. 

Cons

  • $10 inactivity fee after 12 months

68% of retail investor accounts lose money when trading CFDs with this provider.

2. AvaTrade – Best CFD Broker for Investing in Commodities

 

AvaTrade trading platform

AvaTrade is a global CFD and forex broker. Founded in 2006, AvaTrade is fully regulated by the Central Bank of Ireland and the Australian Securities and Investments Commission (ASIC).

Opening an account is straightforward and fully digital. AvaTrade provides several deposit and withdrawal options, all of which are free of charge. It also provides great educational resources which are ideal for beginner traders. 

Assets

In terms of commodity CFD trading, there are 27 commodity CFDs to choose from including oil and gas and gold and silver. AvaTrade also offers other CFD instruments, including ETF CFDs, stock CFDs, forex, and bond CFDs. 

Commodity investing with AvaTrade

Fees

AvaTrade offers commission-free trading as all fees are built into the spreads. In terms of non-trading fees AvaTrade does not charge account fees, and deposits and withdrawals are also free.

On the other hand, AvaTrade charges a $50 per quarter inactivity fee after three consecutive months of inactivity. Furthermore, after 12 months of inactivity, an annual administration fee of $100 is charged. When these inactivity-related fees are added up, they are high when compared to its competitors.

Payments

As an AvaTrade trader, you can choose from five base currencies including AUD, USD, EUR, GBP, and CHF. AvaTrade does not charge any deposit fees. In addition to depositing via bank transfer or credit/debit card, you can also conveniently use e-wallets such as Neteller and POLi. The minimum deposit is 100 AUD. 

Fee Type Fee Amount
Commission Fee 0%
Spread Fee Low spreads
Deposit Fee $0
Withdrawal Fee $0
Inactivity Fee $50 per quarter after 3 months
Account fee None
Cost of trading Sugar CFDs $0.02 over market

Pros

Cons

  • Inactivity fees are above-average 

71% of retail investor accounts lose money when trading CFDs with this provider.

3. Capital.com – Low-Cost CFD Broker for Investing in Commodities

Capital.comCapital.com is a global CFD and forex broker that launched in 2016. It is licensed and regulated by the UK Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC), the Australian Securities and Investments Commission (ASIC), and the National Bank of the Republic of Belarus (NBRB).

Assets

If you’re looking to invest in commodity CFDs with Capital.com you’ll be able to trade 24/5 on a wide range of commodities on both rising and falling markets. There are around 19 commodity CFDs to choose from. You’ll also have access to a range of other CFD assets from stock CFDs and ETF CFDs to forex and stock index CFDs.

Commodity investing with Capital.com (Gold Spot CFD)

Fees

Capital.com has low CFD and forex fees. FCA and CySEC traders can also buy and sell commission-free real stocks spanning across 7 international stock exchanges. When it comes to non-trading fees, there are no deposit fees, withdrawal fees, inactivity fees, or account fees to pay. 

If you keep positions open after standard market hours, aside from the market spreads, the only fees you will have to pay are the overnight financing fees.

Payments

There are five different account base currencies to choose from: GBP, AUD, EUR, PLN, and USD. This is great because it means you won’t have to pay a conversion fee.

You won’t have to pay a conversion fee if you buy and sell stocks and forex pairs in the same currency as your brokerage account’s base currency.

Deposit fees are not charged by Capital.com. In addition to bank transfers and credit/debit cards, you can fund your trading account with e-wallets such as Apple Pay.

Fee Type Fee Amount
Commission Fee 0%
Spread Fee Competitive Spreads
Deposit Fee $0
Withdrawal Fee $0
Inactivity Fee $0
Account fee None
Cost of investing in Gold Spot CFD Spread: 0.29 Pips

Pros

  • Competitive forex and CFD fees
  • Easy onboarding process
  • Top-rated customer service 
  • Practice with a demo account
  • Fully-fledged mobile app

Cons

  • Web trading platform does not support price alerts

76.72% of retail investor accounts lose money when trading spread bets and/or CFDs with this provider. 

Commodity Investing in Australia – Broker Fee Comparison

Broker Commission Deposit Fee Withdrawal Fee Inactivity Fee Cost of trading Gold Spot CFDs
eToro 0% $0 $5 $10 monthly after 12 months 45 Pips
AvaTrade 0% $0 $0 $50 per quarter after 3 months 0.34 Pips
Capital.com 0% $0 $0 None 0.26 Pips

Commodity Investing – What are the Risks? 

what are the risks of commodity investing?

By their nature, commodities are risky investments because they are bought and sold on futures markets with leverage. Commodity traders only have to deposit a fraction of the contract value as margin to gain greater exposure to the market. 

For instance, if the price of gold is $50 per ounce, and the futures contract is for 1,000 ounces, the total value of the trade is $50,000. A commodities investor may only have to deposit $2,500 as margin to control $50,000 of gold. This means that for every $1 that the price of gold moves, the trader stands to profit or lose $1,000 per contract held. 

Market Volatility and Leverage 

Oi prices can experience price movements of over $2 within a single trading day. A couple of dollars up or down translates into a 40% move when you take the required margin into account. While this high risk entices traders with a high risk tolerance, it also keeps more conservative traders at bay. 

Leverage is a double-edged sword. This is because potential profits and losses are calculated on the total value of the position, not just on the margin you paid to open the trade. Trading leveraged, speculative derivatives instruments is not for the faint of heart and requires a good understanding of leverage and complex commodity futures.

Unforeseeable events

High inflation, interest rates, natural disasters, political events, macroeconomic events, new technologies, and even big short squeezes can all have a huge impact on commodity prices. 

However, there are ways to hedge against potential losses. You could place stop-loss orders to help minimize significant losses. 

Commodity Investing with eToro – Quick Guide

Commodity investing can give you exposure to one of the oldest financial markets without having to take ownership of the underlying assets. Let’s have a look at how to invest in commodities with eToro right now as the global economy recovers from the pandemic. 

Step 1: Open an account with eToro

eToro open an account

Go to the official website of eToro and click on the ‘Join Now’ button to create a new trading account. You’ll be required to enter some personal information, as well as create a username and password for your brokerage account. 

68% of retail investor accounts lose money when trading CFDs with this provider.

Step 2: Verify your account

Verifying your account is straightforward. Upload copies of your passport/driving license and a recent utility bill/bank statement and you’re ready to go. The KYC (know your customer) process is fully-digital and takes a matter of minutes to complete. 

Step 3: Fund your account

Funding your trading account is easy and quick. You can deposit funds into your trading account using several payment methods, including debit/credit cards, bank transfers, and e-wallets like PayPal and Neteller.

eToro fund account

There are also no deposit fees to worry about, and the minimum deposit is just $50.

Step 4: Commodity Investing 

You can find specific commodity CFDs via the search bar. Otherwise, you can browse through the available assets by clicking on ‘Discover’ and then ‘Commodities’. For this tutorial, we’re looking to trade Gold Spot CFDs. 

search for Gold with eToro commodity Investing

From the dropdown menu, click on ‘Trade’ next to Gold to open a trade window.  

Now you can enter your total investment, in addition to how much leverage you want to use. When it comes to risk management, you can place stop-loss and take-profit orders with the click of a button. When you’re satisfied with your choices, simply click on ‘Open Trade’. 

Open Trade Gold Spot CFD eToro

It’s worth mentioning that you can either set a market order or you can trade in real-time. If you set a target price, your position will only be opened when the market price matches your target price. 

Commodity Investing – Conclusion

To start gaining exposure to the commodity market, you’ll first need to familiarize yourself with spread betting, trading CFDs, and futures contracts. These are the main ways of buying and selling commodities nowadays. 

But, you’ll need to choose a top-rated CFD broker to do so. All in all, you can create a trading account with eToro in a matter of minutes. On the other hand, you can practice with $100,000 worth of virtual funds by using the eToro demo account.  

eToro – Best CFD Broker with Low Spreads and Copy Trading Tools

eToro

68% of retail investor accounts lose money when trading CFDs with this provider.

FAQs

What is commodity trading?

How to start trading commodities?

What are commodities?

 

About Dassos Troullides PRO INVESTOR

Dassos Troullides is an experienced finance writer who specializes in CFD, stock, forex, and crypto trading. He uses his experience and time spent in the forex industry to simplify complex financial topics for easy, informative reading. Dassos also writes for TradingPlatforms.com, BuyShares.co.uk, LearnBonds.com, InsideBitcoins.com and ForexCrunch.com