Commodity Market Analysis

1. Fundamental Analysis of Commodities

Fundamental analysis focuses on demand and supply. Unlike stocks, commodities have no earnings or balance sheets — they are influenced by production, consumption, and global events.

Below are key fundamental factors that move different commodities:

A. Energy Commodities (Crude Oil, Natural Gas)
Crude Oil

Crude oil prices depend mainly on:

OPEC+ decisions (production cuts or increases)

US crude inventory reports

Middle East geopolitical tensions

Global economic growth (energy consumption)

US Dollar Index (inverse relation)

Example:
If OPEC announces a production cut, supply decreases → crude oil prices rise.

Natural Gas

Natural gas is influenced by:

Weather conditions (winter increases heating demand)

Storage inventory levels

Gas production & LNG exports

High summer temperatures also increase electricity demand (air conditioners), boosting gas usage.

B. Precious Metals (Gold, Silver)

Gold is not just a commodity — it's a safe-haven asset.

Factors affecting gold:

Inflation data (higher inflation → higher gold)

Interest rate decisions (Federal Reserve)

Dollar Index (strong dollar → weak gold)

Global uncertainties (wars, recession fears)

Silver moves with:

Industrial demand (solar panels, electronics)

Gold correlation

Economic cycles

C. Base Metals (Copper, Aluminium, Zinc, Nickel)

Base metals depend heavily on global economic activity.

Key drivers:

China’s economic data (largest consumer of industrial metals)

Infrastructure spending worldwide

Manufacturing & construction demand

Mining output and strikes

Example:
If China announces a stimulus package → copper demand rises → copper prices increase.

D. Agricultural Commodities (Wheat, Soybean, Cotton, Sugar)

Agri-commodities depend on:

Weather (rainfall, drought, frost)

Government MSP policies

Crop cycles

Exports & imports

Example:
A weak monsoon in India → lower wheat production → wheat prices rise.

2. Technical Analysis in Commodity Markets

Technical analysis studies price action, chart patterns, volume, market structure, and indicators to identify trade setups.

Traders commonly use:

A. Candlestick Patterns

Bullish engulfing at support in gold

Shooting star in crude oil after a rally

Hammer in natural gas at bottom levels

Candlestick analysis helps identify market psychology.

B. Chart Patterns

Popular patterns in commodities:

Double tops (crude oil reversal)

Triangles (gold consolidation during FOMC weeks)

Channels (copper trending phases)

Head and Shoulders (major reversals)

Patterns show potential breakout and breakdown zones.

C. Indicators Used in Commodity Trading

Moving Averages (20, 50, 100, 200 MA)
Used to identify the trend direction.

RSI
Identifies overbought/oversold conditions.

MACD
Shows momentum shifts.

Bollinger Bands
Useful in gold and silver for breakout entries.

Volume Profile
Helps identify high-volume zones (strong support/resistance).
Since you like volume profile, this becomes important in crude & metals.

D. Market Structure Analysis

Study of:

Higher highs / higher lows

Supply and demand zones

Break of structure (BOS)

Liquidity zones

Commodities often respect clean market structure because institutions heavily participate.

Example:
Crude oil forms HH-HL structure above 50 EMA → bullish trend confirmed.

3. Sentiment & Intermarket Analysis

Commodity markets react strongly to sentiment and cross-asset relationships.

A. Dollar Index (DXY) Impact

Gold and silver move opposite to DXY

Crude also weakens when dollar strengthens

Reason: Commodities are priced in USD globally.

B. Bond Yields

High bond yields → gold falls

Low bond yields → gold rises

Gold is a zero-yielding asset, so yields compete with gold.

C. Risk-On vs Risk-Off Sentiment

Risk-off: War, recession fear → gold ↑

Risk-on: Economic growth → crude, copper ↑

Sentiment plays a huge role in short-term movements.

D. Inventory Reports

Weekly reports that move markets sharply:

EIA Crude Oil Inventory

API Inventory

Natural Gas Storage Report

Lower inventories → prices rise
Higher inventories → prices fall

4. How to Do Practical Commodity Market Analysis

Here’s a simple but powerful approach you can use daily:

Step 1: Check Global News & Macroeconomic Events

Look for:

Fed speeches

Inflation data

OPEC announcements

Weather updates

War-related headlines

These set the market bias.

Step 2: Identify Trend Using Technicals

Use:

50 & 200 EMA

Market structure

Volume profile zones

Mark supply-demand areas.

Step 3: Use Sentiment Indicators

Check:

Dollar Index

Bond yields

Equity market sentiment

VIX (volatility index)

These help you understand whether safe-haven commodities or industrial commodities will move.

Step 4: Wait for Price Action Confirmation

Look for:

Breakouts

Retests

Reversal candlestick patterns

Volume confirmation

This protects you from false moves.

Step 5: Apply Risk Management

Commodity markets are volatile.
Keep:

Proper stop-loss

Limited position sizing

Avoid over-trading during news events

5. Why Commodity Market Analysis Is Important

High Volatility = Good Opportunities
Commodities give wide movements, helpful for intraday and swing traders.

Hedge Against Inflation
Gold, silver, and crude move sharply during inflation cycles.

Global Market Connectivity
Commodity prices influence stock sectors like:

Oil & gas

Metals & mining

FMCG and agriculture

Useful for Investors and Traders Both
Whether you trade MCX, futures, or ETFs, analysis gives clarity.

6. Conclusion

Commodity market analysis is a powerful combination of fundamentals, technicals, sentiment and intermarket relationships. A successful commodity trader understands how global events, economic trends, weather patterns, and institutional activity influence price movements.

By studying:

Supply–demand fundamentals

Chart structure and volume profile

Dollar index and bond yields

Inventory reports and geopolitical news

…you can predict commodity market trends more accurately and make informed trading decisions.