Commodity Trading in India: How Gold, Silver, Crude Oil and Other Commodities Are Traded

What Is Commodity Trading?

Commodity trading involves buying and selling contracts linked to commodities such as:

• Gold and silver
• Crude oil and natural gas
• Copper, zinc and other metals
• Selected agricultural commodities

A trader does not necessarily take physical possession of the commodity. Instead, they trade a contract whose value changes with the price of the underlying commodity.

Mint explains that investors in India can participate in commodity trading through a registered commodity broker and access commodity futures contracts through the exchange ecosystem.

This makes commodity trading different from walking into a jewellery store and buying gold or purchasing physical silver.

How Is Commodity Trading Done in India?

Commodity derivatives are traded through recognised exchanges, with MCX being a major platform for commodities in India.

The exchange provides contracts with defined specifications such as quantity, price, expiry and settlement terms. MCX describes its role as providing a platform for price discovery and risk management in commodity derivatives.

The basic process is similar to other forms of derivatives trading:

Choose a commodity → Select the contract → Analyse the price → Place an order → Monitor the position

Depending on the contract and strategy, traders may use futures or options.

Gold Trading

Gold is one of the best-known commodities in the Indian market.

Gold prices can respond to several factors, including global interest rates, the US dollar, geopolitical developments, inflation expectations and demand for safe-haven assets.

For example, recent movements in MCX gold have been influenced by global developments involving the dollar, crude oil and interest-rate expectations.

On MCX, investors can access different gold contracts designed for different market participants and trading requirements.

The important thing to remember is that trading gold futures is not the same as buying physical gold. The price may be similar in direction, but the product, contract size, margin and risks are different.

Silver Trading

Silver has a slightly different story.

It is considered a precious metal, but it also has significant industrial uses. This means silver prices can respond to both investment demand and changes in industrial activity.

MCX offers silver contracts in different formats, including Silver, Silver Mini and Silver Micro. The exchange notes that silver contracts can be used for price-risk management and portfolio diversification.

Because silver can be relatively volatile, traders should pay attention to contract size and margin requirements rather than looking only at the quoted price.

Crude Oil Trading

Crude oil is another major commodity traded in India.

Its price can react sharply to changes in global supply and demand. OPEC decisions, inventories, refinery activity, geopolitical events and global economic conditions can all influence crude prices.

MCX's crude oil contracts are linked to the international WTI crude oil benchmark, while the exchange identifies factors such as OPEC supply, inventories, refinery utilisation and geopolitics among the influences on crude oil prices.

This is why a geopolitical development thousands of kilometres away can sometimes affect the price displayed on an Indian trading platform.

What About Other Commodities?

Commodity markets go well beyond gold, silver and crude oil.

MCX provides contracts across bullion, energy and base metals, while commodity markets also include agricultural products through relevant exchanges.

Copper, zinc and aluminium, for example, can be influenced by industrial activity and global economic growth.

The broader commodity market can therefore give traders exposure to different economic themes rather than just one asset class.

Futures and Options in Commodity Trading

Most beginners will encounter two major types of commodity derivatives: futures and options.

A futures contract creates an obligation under the contract to buy or sell the underlying commodity at the specified terms.

An option gives the buyer a right, but not an obligation, subject to the contract terms.

The basic idea is similar to equity F&O, but commodity contracts have their own specifications, expiry cycles, lot sizes and settlement mechanisms.

This is why traders should read the contract details before placing an order.

What Is Margin in Commodity Trading?

One reason commodity futures attract traders is that they are traded using margin, rather than requiring the entire contract value upfront.

But this also introduces leverage.

If a commodity moves in your favour, the impact on the capital deployed can be significant. If it moves against you, losses can build quickly as well.

The margin should therefore not be mistaken for the maximum amount you can lose.

MCX itself advises investors to understand the risks, read the relevant risk disclosure and trade only through registered members.

What Moves Commodity Prices?

Before trading commodities, it helps to understand what drives them.

Gold: Interest rates, dollar movements, geopolitical uncertainty and investor demand.

Silver: Industrial demand, economic activity, investment demand and broader precious-metal trends.

Crude oil: Supply, demand, OPEC decisions, inventories and geopolitical developments.

Base metals: Industrial production, infrastructure demand, global growth and supply disruptions.

Moneycontrol has highlighted how gold, silver, crude oil and other commodities can respond to a combination of macroeconomic, geopolitical and supply-demand factors.

This is one reason commodity trading can require a slightly different approach from trading individual stocks.

Commodity Trading With Dhanush by Ashika

For investors who want to explore commodity trading in India, Dhanush by Ashika provides access to market and trading services, including the commodity segment, subject to applicable account requirements and eligibility.

The platform brings different market segments together, allowing investors to access available trading facilities through one digital platform.

But having access to commodity contracts is only the starting point.

Before placing a trade, check the commodity, contract size, expiry, margin, price movement and applicable charges. It is also worth understanding whether the contract is cash-settled or has delivery-related provisions.

Is Commodity Trading Right for Beginners?

There is no single answer.

Commodity prices can move quickly, and futures and options involve leverage. That can make losses build faster than a beginner may expect.

If you are new to the segment, start by understanding the commodity itself and the contract you are considering. Follow the factors that influence its price and learn how margins and expiry work before taking a position.

Commodity trading can offer another way to participate in financial markets, but it should begin with knowledge of the product, not simply a prediction about whether gold or crude oil will rise tomorrow.

Explore commodity markets with Dhanush by Ashika and make understanding the contract your first trade.