Course index:
- Basic Concepts of Money and Personal Finance
Introduction to the value of money, the importance of saving, and spending control. - Budgeting and Financial Planning
Create a personal budget, manage income and expenses, and set financial goals. - Inflation and Purchasing Power
Explanation of how inflation affects the value of money over time. - Interest Rates and Time in Finance
Differences between simple and compound interest rates and their importance in investments. - How to protect your savings. Protect yourself from scams.
How to protect your money from the scams that abound today - Basic Savings Instruments
Explanation of savings accounts, term deposits, and how they work. - Introduction to the Stock Market
Basic concepts of the stock market and its role in the global economy. - Actions: What They Are and How They Work
Explanation of stocks, types (common and preferred), and how to invest in them. - Bonds: What They Are and How They Work
Differences between corporate and government bonds, and their importance in diversification. - Risk vs. Return on Investments
Concept of risk and how it affects investment choices. - Diversification and Creation of Basic Portfolios
Basic diversification principles to reduce risk in an investment portfolio. - What is an ETF and How Does it Work?
Introduction to ETFs (exchange-traded funds) and how they track market indices. - What is a Mutual Fund?
An explanation of mutual funds and their benefits for beginners. - Financial education for the family
All the information you need to make ends meet. - Economic Cycle and its Impact on Investments
How the stages of expansion and contraction in the economy affect investments. - Growth Stocks vs. Value Stocks
Learn about different types of actions and what to expect from each one. - Fundamental Analysis of Stocks
Explanation of how to analyze a company's value based on its fundamentals. - Basic Technical Analysis: Charts and Patterns
Introduction to basic technical analysis tools, such as trend lines and candlestick patterns. - Options: What They Are and How They Work
Basic concepts of call and put options and their uses in investments. - Futures: What They Are and How They Work
Introduction to futures contracts and their application in investment and speculation. - Introduction to Cryptocurrencies
What is digital money, how it was created, and the characteristics of Bitcoin and other cryptocurrencies. - Blockchain and its Importance in Finance
How the technology behind cryptocurrencies works and their applications in finance. - Risks in Cryptocurrency Trading
Volatility, fraud, and regulations in the cryptocurrency market. - Leverage Principles and its Risk
What it means to trade with leverage and the associated risks. - Investor Psychology and Emotion Management
How emotions influence investment decisions and tips for managing them. - What is Algorithmic Trading
Basic explanation of the use of algorithms to perform operations in the financial market. - Financial Analysis of Companies
Introduction to basic financial statements and their interpretation for valuing companies. - Investing in Commodities: Gold, Oil, and Other Goods
How commodity investments work and their role in diversification. - Advanced Investment Strategies: Hedging and Derivatives
Introduction to strategies for managing risks through financial derivatives. - Creating and Managing a Complete Portfolio
Practical application of prior knowledge to build and manage a diversified portfolio.
Investing in commodities is like immersing yourself in the heart of the global economy, and in Argentina it has a special flavor thanks to our natural wealth and our history as an exporter. Commodities are basic goods such as gold, oil, soybeans, corn, and copper, which are traded on international markets and serve as the basis for industries, food, and economic refuges.
They're not company stocks or government bonds; they're tangible resources that we all use every day, from the fuel that fills your car to the wheat that ends up in your bread. In a country like Argentina, where the countryside and natural resources are pillars of the economy, investing in commodities offers unique opportunities, but also challenges due to volatility and dependence on the global market.
This article will guide you through understanding commodities, their characteristics and crucial role in the economy, the specific advantages of investing in gold and oil, and the factors that drive their prices. We'll explore each aspect in depth, with local examples and a relaxed tone, as if we were chatting after reading The Pocket Investor at a grill at Carlos Keen's.
Characteristics of commodities and their role in the economy
Commodities have characteristics that make them distinct from other financial assets. They are standardized and fungible goods, meaning that a barrel of Brent crude oil is the same in London as it is in Houston, as long as it meets specifications. They are classified into two broad groups: soft commodities (agricultural products such as soybeans, corn, coffee, or sugar) and hard commodities (minerals and energy products such as gold, silver, copper, or oil). This standardization allows them to be traded on global markets such as the Chicago Mercantile Exchange (CME) or the London Metal Exchange (LME), where prices are set by supply and demand.
A key characteristic is its cyclical nature. Prices rise and fall depending on harvests, extraction, or industrial demand. For example, a good year for soybeans in Argentina can lower prices due to excess supply, while a drought can send them soaring. In Argentina, agricultural commodities such as soybeans and corn account for more than 60% of total exports, according to INDEC data from 2023, making them a vital economic driver. This affects the exchange rate, the trade balance, and even employment in rural areas.
Their role in the global economy is immense. Oil powers transportation and industry, gold acts as a safe haven in crises, and metals like copper are essential for technology. In Argentina, the Vaca Muerta boom has put oil and gas on the map, while gold attracts investors seeking protection from inflation. Commodities also serve as diversifiers in a portfolio. When stocks fall due to a crisis, gold or oil can rise, offsetting the losses. This is especially useful in a country where the stock market can be shaken by political or economic news.
The local impact is enormous. For example, an increase in the international price of soybeans benefits Argentine producers, but also puts pressure on the Central Bank to manage its dollar reserves. In 2022, a year of drought reduced the soybean harvest by 2014-2023, raising global prices and leaving Argentina with fewer exports. This shows how commodities not only move markets but also influence daily life, from the price of bread to the value of the peso.
Advantages of investing in gold and oil
Investing in gold and oil has benefits that make them attractive, especially in an Argentine context where economic stability is a constant challenge. Let's break them down in detail so you can see why these commodities are a popular option.
- Gold as a safe haven: Gold doesn't generate interest or dividends, but it's an asset that tends to increase in value during economic crises, high inflation, or geopolitical uncertainty. In Argentina, where the peso loses value year after year (inflation exceeded 100%TP3T in 2023), gold is a lifeline. You can buy it physically (in bars or coins) or through ETFs like the GLD, which are listed on the stock exchange. In 2022, while the blue dollar rose 60%TP3T, gold increased 101%TP3T globally, protecting the assets of many local investors.
- Oil and its role in global energy: Oil is the king of commodities because it drives transportation, industry, and plastics production. Investing in oil, whether through futures, ETFs, or stocks of companies like YPF, exposes you to a market that's constantly changing. In Argentina, Vaca Muerta has put the country on the oil radar, and an increase in the price of WTI crude (from $70 to $90 per barrel in 2023) directly benefits these operations. Furthermore, oil tends to stabilize with energy demand, making it less volatile than technology stocks.
- Portfolio diversification: Both gold and oil have a low correlation with traditional stocks and bonds. When the stock market falls due to a crisis, gold can rise as a safe haven, while oil remains stable due to constant demand. In Argentina, where the Merval (stock market index) can fall by 101%TP3T due to news of a devaluation, this is a shield. For example, during the 2020 coronavirus crisis, while stocks were sinking, gold rose by 151%TP3T. Logically, the effects can overlap. Perhaps during an Argentine crisis, oil prices will rise, causing most local companies to fall, but YPF may not fall as sharply or even remain neutral due to the effect of its favorite commodity.
- High liquidity: These commodities are traded on massive global markets. You can buy or sell gold and oil quickly, without being trapped like you are with some local stocks. In Argentina, where stock market liquidity sometimes dries up, this is an advantage.
- Inflation protection: In a country like Argentina, where inflation erodes purchasing power, gold and oil act as a hedge against the devaluation of the peso. While savings in pesos lose value, a gold bar or a position in oil futures can maintain or increase its value in real terms.
Factors influencing commodity prices
Commodity prices are no mystery; they're determined by a mix of global and local factors. Let's delve into each one so you can fully understand them.
- Supply and demand: This is the basis of everything. If oil production falls due to a hurricane (as in the Gulf of Mexico in 2020), prices rise. In Argentina, the weather plays a huge role in soybeans and corn. A year of drought, as in 2022, reduced the harvest by 2014-2023, driving up international prices and affecting local exports.
- Geopolitical conditions: International tensions are driving prices. The war in Ukraine since 2022 has caused oil prices to rise by 30% in 2023 due to supply uncertainty. In Argentina, this impacts YPF and import costs, influencing inflation.
- The value of the dollar: Since commodities are priced in dollars, when the dollar rises, prices tend to fall, and vice versa. In Argentina, with the exchange rate controls and the differences between the official and blue dollar, this creates opportunities and risks.
- Production and storage: Supply depends on how much is produced and stored. In 2020, overproduction of oil due to the pandemic led to negative prices due to a lack of space. In Argentina, Vaca Muerta production has increased, but infrastructure limits its impact on global prices.
- Inflation and interest rates: When inflation rises, gold attracts more investors as a safe haven. But if interest rates rise (like Argentina's 100% in 2023), gold may lose its appeal because bonds yield more. Oil, on the other hand, follows industrial demand, which sometimes grows with inflation.
- Government policies: Subsidies, taxes, or export restrictions affect prices. In Argentina, soybean export controls have limited supply, raising domestic prices in some cases. This also depends on decisions such as those of China, a major buyer.
- Natural disasters and climate events: Droughts, floods, or hurricanes change the equation. In 2023, rains in northern Argentina affected corn, raising its price by 15% on the local market.
These factors are interdependent. For example, a war can reduce oil supply, but if the dollar rises at the same time, the impact is softened. In Argentina, where we export heavily and depend on the weather, being aware of these variables gives you an advantage.
How to invest in commodities in Argentina
There are several ways to get into this world. You can buy physical gold (bullion or coins) at exchanges or reputable jewelry stores, though be careful with the costs. There are also gold ETFs (like GLD) or oil ETFs (like USO), which are listed on the stock exchange and can be purchased through platforms like Balanz or Inviu.
Futures are another option, where you agree to buy or sell a commodity at a fixed price in the future. For example, you can buy a WTI crude oil future at $80 per barrel for three months from now. In Argentina, this is most often done through international brokers because local supply is limited.
Company stocks also work, albeit indirectly. Investing in YPF gives you exposure to oil, or in agricultural companies like Cresud for soybeans. Local mutual funds or ETFs that include commodities are accessible and diversified, ideal for getting started. Of course, as we saw, in the case of stocks, there are two currents that run parallel: the reality of the commodity itself, and that of the company itself.
Start small and do your research. Volatility can be brutal, and in Argentina, with the currency controls and inflation, you have to choose your timing wisely. Use platforms that allow you to simulate trades before investing real money.
Risks of investing in commodities
Not everything is profitable. Volatility is the biggest risk. The price of oil can fall by 2018-2023 in a week due to a single piece of news, as happened in 2020. Gold, although stable, doesn't always rise; it depends on rates and global sentiment.
In Argentina, exchange rate risk is key. If you invest in dollars but can't access them because of the currency controls, you lose flexibility. Furthermore, your dependence on the local climate (soybeans, corn) exposes you to unpredictable factors.
Investment strategies
- Hedging: Use futures to lock in prices and protect against downside.
- Diversification: Mix gold, oil and other commodities.
- Technical analysis: I followed indicators like the RSI for timing.
Final tips
- Get informed: Read about global supply and demand.
- Consult experts: An advisor helps you navigate risks.
- Monitor: Check prices and news regularly.
Next course date
Questions for you to reflect on
What is the purpose of investing in gold?
In the long run, who will win? Commodities or stocks?
Why might it be a good idea to invest in companies related to certain commodities?
A brief overview of The Pocket Investor
The Pocket Investor is a project that combines experience and passion for financial education to help you transform your relationship with money. Through personalized mentoringWe help you design investment strategies tailored to your goals and needs, optimizing your portfolio to address challenges like inflation and the dollar.
The books on finance and investment, including the popular The Argentine Pocket Investor - El Inversor de Bolsillo argentino, are practical tools that explain complex concepts in a simple way, bringing the world of investments closer to anyone interested in financial growth.
See more notes from our blog:
-
Sir Isaac Newton: The Brilliant Scientist, Theologian, and Investor
On March 31, 1727, Sir Isaac Newton, one of the most important scientists in history, died. However, his legacy extended beyond science, but also to investment and even religion.
-
Priceline.com's Incredible IPO and the 5 Lessons It Leaves for Investors
On March 30, 1999, Priceline.com's initial public offering (IPO) took place. Trading began at $16 and closed at $69, tripling the profits of its initial investors. At the time, the company was trading at a higher price than United Airlines, Continental Airlines, and Northwest Airlines combined, a clear…
-
Who is Doctor Catastrophe and his surprising prophecy?
Nouriel Roubini, an American economist known for his apocalyptic predictions and nicknamed "Doom," was born on March 29, 1959. Discover his story and how what he predicted came to pass in a shocking way.
Aeronautics saving Apple Financial Advisor banks Berkshire Hathaway Stock market bonds bubble Dot-com bubble byma commodities South Sea Company Financial advice Cryptocurrencies crisis subprime crisis free finance course economy Start investing pyramid scheme USA Facebook finance Personal finances IBM inflation England finance books investment books LTCM financial mentoring Argentine market stock market international market Meta Microsoft Nasdaq Oil Russia Steve Jobs Technology value investing Wall Street Warren Buffett
