How to Trade Commodities in Australia 2025
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Quick Answer: How Do I Trade Commodities?
- Pick a commodity like gold or oil.
- Choose CFDs or ETFs to start.
- Open an ASIC-regulated account — eToro suits beginners, CMC for advanced.
- Build a strategy with stops.
- Place trades, manage risk.
- Keep records for ATO tax reporting.
Introduction
One of the biggest reasons I trade commodities is that they tend to hold their ground when inflation starts eating away at traditional assets. When the cost of living goes up, physical goods like gold, oil, and wheat often rise in value too. That makes them a reliable safety net in times of economic uncertainty.
What Are Commodities and How Do They Work?
Commodities in trading are raw materials or primary goods like gold, oil, wheat, or coffee that are bought and sold on global markets. Traders speculate on their prices through futures, CFDs, or ETFs. Commodities often help diversify portfolios and hedge against inflation or economic uncertainty.
What Types of Commodities Can You Trade?
Commodities are generally split into two main categories: hard and soft.
- Hard commodities are raw materials that are mined or extracted—things like gold, iron ore, natural gas, and oil. These are the ones I focus on most, partly because I live in Australia and we’re rich in these resources. Our iron ore and LNG exports to Asia, for instance, have a massive influence on local economic activity.
- Soft commodities, on the other hand, are agricultural products—wheat, cotton, sugar, etc. They’re a bit trickier because they’re highly seasonal and weather-sensitive. But that volatility can be a goldmine if you know how to read market conditions.
So How Do Commodities Work?
What Factors Influence Commodity Prices?
What makes commodity trading so exciting—and sometimes nerve-racking—is how fast things can change. Unlike shares, which respond mostly to company performance, commodity prices are swayed by a long list of external forces.
Here’s what I pay attention to:
- Supply and demand shocks (e.g., floods wiping out crops or overproduction in oil)
- Geopolitical events (wars, sanctions, or unrest in oil-rich regions)
- OPEC decisions (these can move oil prices dramatically overnight)
- Weather and natural disasters (especially relevant for soft commodities)
| Commodity | Category | Global Demand | Local Relevance | Volatility |
|---|---|---|---|---|
| Gold | Hard | Very High | Very High | Medium |
| Iron Ore | Hard | High | Very High | Low |
| Crude Oil | Hard | Very High | Medium | High |
| Wheat | Soft | Medium | High | Medium |
| Natural Gas | Hard | High | High | High |
In Australia, there are also unique market drivers. I’ve seen wheat prices soar after a major drought, and iron ore dive when tensions rise with China. You start to realise that global headlines can have very local consequences.
How Much Do Commodity Prices Fluctuate?
Commodity prices can fluctuate by 1–5% daily, but during supply shocks or geopolitical events, moves of 10% or more happen. Volatility depends on the commodity; oil and gold often swing sharply, while grains might be steadier. Always check historical ranges to understand typical price movements before trading.
What economic indicators most impact commodities like gold, oil, or wheat?
Interest rates, inflation data, USD strength, supply reports (like EIA for oil, USDA for crops), and geopolitical tensions all drive commodity prices. Watch global calendars for key data releases that spark volatility.
What Are the Different Ways to Trade Commodities?
Futures Contracts – For the Experienced Traders
Futures were the first type of commodity trading I came across, and they’re not for the faint of heart. When you trade futures, you’re agreeing to buy or sell a specific amount of a commodity at a set price and date. The leverage is high, the risks are real, and things can move fast. I’ve only dabbled here because it requires a deep understanding of market cycles and expiry dates. These are more suited to professional traders or those hedging large positions.
CFDs – My Go-To for Flexible Commodity Trades
For retail traders like me, CFDs (Contracts for Difference) offer a much more accessible entry point. I use CFDs when I want to speculate on short-term price movements—say, when I think oil is about to spike due to an OPEC announcement. You don’t own the physical commodity, but you can go long or short, and you’ve got access to leverage (though that’s a double-edged sword). It’s fast, flexible, and works well with technical analysis.
ETFs – Set and Forget Investing
If you’re more into passive investing, ETFs are a solid option. I’ve used gold and energy ETFs in my longer-term portfolio. They’re great because you can buy them through most standard share trading accounts, and you get exposure to commodities without worrying about expiry dates or leverage. Ideal for anyone who wants to diversify without actively trading.
Physical Commodities – The Old School Way
I’ve also bought physical gold in the past—mainly as a hedge and store of value. It’s not something I trade regularly because of the logistics (storage, insurance, resale). But for those who want tangible assets, physical commodities still have a place.
| Method | Ownership | Leverage | Experience Level | Best For | Key Risk |
|---|---|---|---|---|---|
| Futures | No | High | Advanced | Hedging, speculation | Contract expiry, complexity |
| CFDs | No | High | Intermediate | Active short-term traders | Volatility, margin calls |
| ETFs | Yes | None | Beginner | Long-term investors | Slower price movement |
| Physical assets | Yes | None | Advanced | Collectors, gold buyers | Storage, liquidity issues |
Each of these approaches has played a role in my strategy at different stages of my trading journey. The key is starting with what suits your level—and growing from there.
How Do You Start Trading Commodities in Australia? (Step-by-Step Guide)
Getting started with commodity trading in Australia doesn’t have to be complicated. Once I decided to dive in, the process was actually pretty straightforward. That said, there are a few important steps you’ll want to get right from the beginning.
Step 1: Decide Which Commodity to Trade
Start by picking a commodity like gold, oil, natural gas, or wheat. Consider how global demand, Australian exports, and seasonal factors affect prices. Metals hedge against inflation, while oil reacts to geopolitical tensions. Focus on one market you understand well—it’s easier to develop strategies when you know what truly drives price moves.
Step 2: Select a Trading Method
Choose between CFDs, futures, ETFs, or even physical commodities. Most Aussie beginners start with CFDs or ETFs due to lower capital needs. CFDs let you speculate on price without owning the asset, while ETFs track prices with no leverage risk. Match your choice to your risk tolerance and whether you want short-term trades or long-term exposure.
Step 3: Open and Verify a Trading Account
Sign up with an ASIC-regulated broker for safety. In Australia, eToro is ideal for beginners with a simple interface, social trading, and robust demo tools. CMC Markets suits advanced traders, offering powerful platforms, tight spreads, and extensive commodity products. Complete KYC checks by submitting ID and proof of address, then fund your account securely.
Step 4: Develop a Trading Strategy
Plan how you’ll trade. Use charts, economic calendars, and news to spot opportunities. Trend strategies work well with commodities that follow strong macro cycles. Always set clear stop-loss and take-profit levels to manage risk. Remember, commodity prices often react sharply to global reports—sticking to a tested system avoids emotional, knee-jerk trades.
Step 5: Place and Manage Your Trades
Enter trades through your broker’s platform, checking position sizes and stop levels carefully. Stay disciplined, monitor your trades, but avoid micromanaging every price tick. Be aware of overnight funding costs for CFDs or expiry considerations on futures. If using leverage, manage it conservatively—big swings in commodities can wipe out unprotected accounts quickly.
Step 6: Keep Records for Tax and Review
Keep a detailed log of every trade: dates, reasons, results. Store broker statements for the ATO; trading profits are taxable, with CFDs often treated as income and ETFs under capital gains. Reviewing trades helps you spot strengths and mistakes, refine strategies, and grow more confident. Strong records also keep you fully compliant come tax season.
Should You Use a Demo Account First?
Yes. A demo account lets you practise risk-free, test strategies, and learn platform tools without losing money. For Australians, eToro offers an intuitive demo great for beginners, while CMC’s advanced demo suits experienced traders. Trading live without practice often leads to costly mistakes. Build discipline and confidence first.
What’s the best time of day (or year) to trade commodities?
Most commodities move most during overlapping US-London hours. Seasonally, grains trend at harvest, oil spikes on winter demand. Time trades around known cycles and high-volume sessions for better liquidity.
Which Platforms Are Best for Commodity Trading in Australia?
Look for ASIC-regulated Trading platforms offering a wide range of commodities, tight spreads, solid risk tools, and easy funding. In Australia, eToro and CMC Markets stand out. Both provide strong trading experiences, but suit different trader levels—depending on whether you’re just starting out or looking for advanced tools and analytics.
Which Is Best for Beginners?
eToro is ideal for beginners. It’s ASIC-regulated, has an intuitive interface, social trading to learn from experienced traders, and a free demo account. You can trade gold, oil, and commodity ETFs without complex setups. Its CopyTrader feature helps you follow seasoned commodity investors, making it a simple way to start learning.
Which Is Best for More Advanced Traders?
CMC Markets suits advanced traders seeking more control. It offers professional-grade charting, dozens of commodity CFDs, tight spreads, and powerful risk management tools. Their platform supports complex orders and advanced technical analysis, perfect for seasoned traders who want detailed insights into price action, liquidity, and broader market data.
How Do You Manage Risk When Trading Commodities?
Use strict risk management. Set stop-loss orders on every trade, size positions based on your total capital, and never risk more than 1–2% per trade. Monitor leverage carefully—commodity prices can swing sharply. Diversify your portfolio so you’re not overexposed to one market, and always trade with a clear, disciplined plan.
What Are the Biggest Risks?
Commodities are highly volatile, moving on global events, weather, or geopolitical tensions. Leverage amplifies both gains and losses, so a sudden move can wipe out your account. Liquidity risks also exist in less-traded contracts. Ignoring economic data or trading emotionally are major mistakes that magnify losses.
How Can You Protect Your Capital?
Always use stop-losses to limit downside. Trade smaller sizes, especially with leverage. Keep detailed journals to learn from mistakes. Diversify across commodities or include ETFs to balance risk. Practise in demo accounts before going live, and review economic calendars so you’re not surprised by key reports that can trigger big moves.
Do You Need to Pay Tax on Commodity Trades in Australia?
Yes. In Australia, profits from commodity trading are taxable. Long-term holdings like ETFs typically fall under Capital Gains Tax, while active CFD or futures trading may be treated as ordinary income. Keep detailed records of every trade, and consult a tax professional to ensure you’re compliant with ATO rules.
Final Thoughts
Commodity trading is dynamic, responsive to world events, and offers real opportunities to hedge against inflation or diversify beyond traditional assets.
That said, it’s not for everyone. If you enjoy digging into global news, analysing charts, and managing your own positions, you’ll probably find it as engaging as I do. But if you’re just starting out, I’d recommend testing the waters with a demo account or even a low-risk commodity ETF.
Most importantly, stay informed. Follow Australian financial news, commodity reports, and economic calendars religiously—it will keep you sharp and help stay ahead of the curve.
And remember our platform recommendations for trading: etoro is best for beginners and CMC is best for more advanced traders.
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FAQs
What is the easiest way to start trading commodities in Australia?
Open an account with a broker that offers commodity CFDs or ETFs. Some platforms will let you start with low minimum deposits and user-friendly tools.
Do I need a lot of money to trade commodities
Not necessarily. Many brokers offer leverage or fractional trading through CFDs and ETFs, so you can start with as little as $50–$200. Just be mindful of the risks that come with using leverage.
What are the best commodities to trade in Australia?
Popular commodities include gold, iron ore, crude oil, wheat, and natural gas, many of which are tied to Australia’s export economy. Gold and oil are especially favoured by traders for their high liquidity.
Is commodity trading in Australia safe and legal?
Absolutely. These brokers must meet strict financial and security standards, which adds a layer of protection for retail traders like you and me.
References
- ASIC – Australian Securities and Investments Commission
- ASX – Australian Securities Exchange
- Trading Economics – Australia Commodities
- Australian Taxation Office (ATO) – Capital Gains Tax
- OANDA – Commodity Market News and Analysis
- Bureau of Meteorology – Climate & Agriculture Reports
