Commodities are not one asset class but four very different markets: precious metals, energy, industrial metals and agricultural commodities. For most investors, they are a complementary layer in the portfolio, not its core. Read what moves commodity prices, what they have returned historically and how physical ownership, ETCs and ETPs, company shares and futures differ from one another.
This content has been produced by Kvarn Investment Services Ltd, a licensed investment firm supervised by the Finnish Financial Supervisory Authority. The content is intended for informational purposes only and should not be interpreted as investment advice or recommendation. All investing involves risks, and past performance is not a guarantee of future returns.
This article is part of Kvarn X's alternative investments series. The series covers each institutional asset class in full: real estate, private equity, private credit, hedge funds, structured products and crypto-assets.
Key takeaway: Commodities are not one asset class but four very different markets: precious metals, energy, industrial metals and agricultural commodities. For most investors, they are a complementary layer in the portfolio, not its core. The most important question is not whether a commodity will rise, but what you actually own: the physical commodity, a product tied to the futures curve or a company that produces the commodity.
Commodities are an unusual asset class for investors. With a share, the investor owns a stake in a business, and with a fixed-income investment, they lend money and receive interest in return. With a commodity, however, the investment is the raw material or basic physical good itself: gold, silver, oil, natural gas, copper, wheat, coffee or sugar. That is why commodities behave in a fundamentally different way from both equities and fixed income.
For Finnish investors, commodities are interesting above all for three reasons. They can offer diversification, they can act as a hedge against inflation or crises in certain situations, and they are now easier to access than before through digital services, ETC and ETP products and exchange-traded solutions. At the same time, this very accessibility makes the asset class easy to misunderstand: an investor can buy commodity exposure without understanding whether they own the physical commodity, a product tied to the futures curve or a company that produces the commodity. That is a big difference.
The role of commodities varies widely depending on how large the portfolio is and what job the allocation is meant to do.
Portfolio under €100,000: At this size, commodities are not usually the foundation of the portfolio. If you want exposure, gold is the most natural starting point: a small weight in physically backed gold or a gold ETC. For most investors, a broad futures-based commodity basket is an unnecessarily complex first step.
Portfolio of €100,000–500,000: Commodities can be a justified complementary allocation: gold as a safe haven or inflation hedge, and an energy or broader ETC/ETP structure for diversification. The most important thing is to understand whether you own the physical commodity or a product tied to the futures curve.
Portfolio over €500,000: Commodities can form a separate strategic layer: gold as a reserve asset, energy as cyclical exposure and agriculture as a diversifying addition. Direct futures mandates or tailored commodity basket structures are possible and often better than retail ETC structures.
Beginner investor: Commodities are not usually the foundation of the portfolio, but at most a small complementary addition. Their role is typically linked to safe-haven thinking along the lines of gold, or to seeking diversification, but for most investors the bigger benefit comes first from getting the structure of their equity and fixed-income portfolio in order. Exposure is most commonly sought either through a small weight in gold or through a simple exchange-traded product, not through a broad futures-based commodity basket.
Private banking client: Commodities are most often a complementary allocation used to seek diversification, inflation protection or a specific view on, for example, gold or energy. In practice, their role is rarely to be a core investment. Instead, it is to add behaviour to the portfolio that differs from that of equities and fixed income. Exposure is typically sought through physically backed gold, ETC and ETP structures, commodity ETFs or selected thematic products.
Institutional investor: Commodities are usually a separate risk factor and a tactical or strategic allocation layer whose purpose depends on the commodity group. Gold can act as a liquid safe haven and reserve asset, energy as exposure to inflation and the business cycle, and agricultural commodities as a diversifying but structurally more demanding addition. Exposure is most often sought through derivatives and futures, as strategic commodity baskets or as tightly defined precious metal weights.
In Finland, commodities have not traditionally played as large a role in private investors' portfolios as they have in, for example, the United States or some Central European markets. Internationally, however, gold in particular is an established cornerstone of the portfolio for many wealthy investors, family office structures, central banks and institutional investors when the aim is diversification, a liquid safe haven and managing uncertainty.
From an investor's point of view, commodities fall roughly into four large groups: precious metals, industrial metals, energy commodities and agricultural commodities. This division is much more useful than lumping all commodities together, because the sources of return, risks and behaviour of these groups differ clearly from one another.
In precious metals, the emphasis is often on preserving wealth, the search for safe havens, central bank demand and investor confidence. In energy commodities, prices move more with geopolitical tensions, production, inventories and global demand. In agricultural commodities, weather, crop prospects, fertiliser costs, logistics and trade policy often matter as much as the business cycle itself.
This leads to an important practical lesson for investors: commodities should not be seen merely as an inflation hedge or an alternative investment, but as markets with their own logic. Gold does not behave like oil. Silver is not the same thing as copper. Wheat does not move for the same reasons as natural gas. The quality of a commodity allocation therefore depends more on selection and structure than on simply having some commodities in the portfolio.
This is the point that many articles on commodities leave out, even though it is precisely what determines the reader's expectations. According to Morningstar, the Bloomberg Commodity Index has lagged most major asset classes from 1991 onwards and only narrowly beaten cash and inflation. In other words, broad commodity indices have not historically been long-term return engines in the way equities have.
This does not make commodities a poor asset class, but it forces investors to set their expectations on the right scale. The value of commodities has lain more in diversification, inflation sensitivity and the way they have at times behaved in crises than in strong real returns. If you approach commodities with the idea that they will replace equities over the long term, the starting assumption is historically weak. If, on the other hand, you use them as a complementary layer, their role is easier to justify.
There are four main routes into commodities. The first is physical ownership. This is most natural for precious metals, and above all for gold. The investor then owns the commodity itself or a physical right tied to it. The advantages are clarity and direct exposure. The drawbacks relate to storage, insurance, buying and selling costs and practical implementation.
The second route is an exchange-traded product, such as an ETC, an ETP or, in some cases, an ETF solution. On Kvarn X, you can trade ETFs and ETPs. With an exchange-traded product, commodity exposure does not require a futures account or arranging your own storage.
The third route is a company that produces the commodity. A gold mining company, an oil company or a fertiliser manufacturer can provide indirect exposure to the commodity market. In this case, however, the investor does not own the commodity itself, but a business whose earnings depend partly on the price of the commodity.
The fourth route is futures- or derivatives-based exposure. This is a common way for institutions to build a broad commodity portfolio, but it is also the easiest to misunderstand. The return on a futures-based product does not depend only on the commodity's spot price, but also on the futures curve, roll costs and term structure.
A step-by-step guide to choosing between these four routes can be found at the end of the article.
A practical next step
If you want to compare ways of implementing commodity exposure in practice, take a look at the Kvarn X Invest page and see which solutions are based on physical ownership, ETFs or ETPs.
Of all the commodity groups, precious metals are probably the most natural for investors. The reason is that their use as an investment is much more established than that of, for example, agricultural commodities or energy. Within this group, gold's position is by far the strongest.
With gold, the most important question for you as an investor is not just whether gold will rise or fall, but why you want gold in your portfolio. Gold can act as a diversifier, a long-term store of value and a safe haven in times of uncertainty. However, it is not a productive asset in the same way as a share, so it should not be assessed by the same yardsticks.
Silver is an interesting but often misunderstood metal for investors. It combines the logic of a precious metal with that of an industrial metal. That is why silver can benefit from the same search for safe havens as gold, while at the same time suffering or benefiting from changes in industrial demand.
The most important structural change of this decade is silver's growing role in solar power. According to the Silver Institute, the solar panel industry is one of the most significant and fastest-growing uses of silver, and its share of industrial demand for silver has risen markedly over the past decade. That is why silver should not be treated simply as cheap gold, but as a metal in its own right, with demand dynamics partly tied to the energy transition.
Platinum and palladium are even more clearly markets in which investment demand and industrial use are intertwined. Their behaviour is strongly influenced by factors such as demand from the automotive industry, emissions standards and supply chains. For ordinary investors, these are more often tactical than strategic exposures.
Explore Kvarn X Gold
If you want to see what digital ownership linked to physical gold looks like in practice, take a look at Kvarn X Gold.
With Kvarn X Gold, you can buy and own investment gold digitally and trade it around the clock. The service is provided by Kvarn Metals Oy, which is not supervised by the Finnish Financial Supervisory Authority (FIN-FSA). Gold is not a regulated investment product and is not covered by deposit or investor protection, and its value can rise or fall with the market price and exchange rates.
This is a good example of how ownership based on a physical commodity can be brought into a more accessible digital form. Kvarn X Gold does not, however, change the basic nature of gold. It makes owning gold more practical. The investment thesis should still be about gold itself, not the user interface.
Key takeaway: For beginner investors, gold is the easiest commodity to understand, but even gold is not a magic solution. For private banking clients, a role for gold can be justified if the goal is diversification or a safe haven, not a quick return. For institutional investors, gold's role differs clearly from that of energy and agriculture, and there is often good reason to assess it as a strategic commodity, not just a cyclical one.
Silver, platinum and palladium on Kvarn X
For precious metals other than gold, exposure is in practice built through exchange-traded ETCs and ETPs. Compare the options on the Kvarn X Invest page and check whether the product is physically backed or futures-based.
If gold is the strategic classic of commodity investing, energy is the most cyclical and political part of the commodity market. Oil in particular is a global price that reacts quickly to production decisions, inventory levels, transport routes, demand outlooks and geopolitical tensions.
The EIA's April 2026 Short-Term Energy Outlook (STEO) estimates that the Brent price will peak at around $115 per barrel in the second quarter of 2026 and fall below $90 in the fourth quarter as the effects of the conflict and the closure of the Strait of Hormuz ease. The EIA forecast assumes that traffic through the Strait of Hormuz will gradually recover towards the end of the year. This illustrates how a short-term geopolitical shock and medium-term inventory logic can pull in different directions.
For long-term investors, it is important to understand that oil is no longer just a cyclical commodity, but also a commodity of the energy transition. The IEA's Oil 2025 report highlights that the balance between demand, supply and spare production capacity is changing over the course of this decade. This does not mean that oil will disappear, but that the logic of demand and valuation can change slowly but meaningfully.
Natural gas is an even more local market than oil, and at times an even more volatile one. Its pricing depends on a combination of inventory levels, weather, pipeline and LNG capacity and regional demand. For European investors, natural gas is not just a global energy commodity, but a strongly regional market.
With energy, the biggest mistake is to confuse the structure of the product with the price of the commodity itself. Futures-based oil products can behave very differently from what investors expect, because the futures curve and rolling affect the return. That is why an oil or energy ETP is not the same thing as owning the oil price.
Key takeaway: For beginner investors, energy is usually a more difficult first commodity than gold. For private banking clients, the most important practical question is the product's structure and understanding futures exposure. For institutional investors, energy's role is often tactical, cyclical or inflation-related, not the same as gold's strategic role.
Energy exposure on Kvarn X
You can access oil, natural gas and broader energy baskets through exchange-traded ETPs. Compare the options on the Kvarn X Invest page. Check the product's structure in particular: a futures-based energy ETP does not track the spot price.
Agricultural commodities are the part of the commodity market that many investors understand least. This is because their prices do not move only with global demand and economic growth, but also with weather, crop expectations, fertilisers, logistics, inventories, export restrictions and trade policy.
The FAO's 2025 reports highlight that global food commodity production remains vulnerable to weather conditions and that trade tensions, policy uncertainty and supply chain disruptions can affect prices and availability.
Wheat, corn, soybeans, coffee, sugar and cocoa are not a single basket for investors. Their supply chains, seasonality and market structures differ from one another. The price of coffee can rise because of crop problems at the same time as wheat is under pressure for different reasons. This makes agricultural commodities interesting, but also hard to generalise about.
For investors, the problem with agricultural commodities is most often that they are almost always held through a futures or index structure. Returns then depend not only on the fundamentals of the raw material, but also on how the product builds its exposure on top of the futures curve.
Key takeaway: For beginner investors, agricultural commodities are not usually a natural first commodity purchase. For private banking clients, a broad commodity basket can include agricultural exposure even if it goes unnoticed. For institutional investors, agricultural commodities are a risk world of their own, in which weather, politics and logistics have an exceptionally large impact.
Agricultural exposure on Kvarn X
Exposure to agricultural commodities is almost always achieved through a futures- or index-based ETP structure. Compare the options on the Kvarn X Invest page and note that a broad commodity basket can include agricultural exposure without you choosing it separately.
Of the commodity groups, industrial metals are the one whose source of return is easiest to explain. The gold price stems from confidence and opportunity cost, and the oil price from geopolitics and inventories, but the prices of copper, aluminium, nickel and zinc stem directly from how much the world builds, electrifies and invests in grids.
The group is not marginal. In the Bloomberg Commodity Index's 2026 target weights, industrial metals account for around 16%, compared with around 19% for precious metals and around 29% for energy. Copper is the index's largest industrial metal with a weight of around 6%, while gold's weight is around 15%. An investor in a broad commodity basket therefore gets industrial metals in their portfolio, whether they know it or not.
The supply side is the most important characteristic of this group. A new mine typically takes 10–15 years to go from discovery to production, and high prices do not increase supply quickly. On the demand side, electrification, grid investment and data centre construction are structural factors that do not follow the economic cycle in the same way as traditional construction. At the same time, China's construction cycle remains the single most important short-term price driver.
For Finnish readers, this group is more tangible than any other commodity group. Boliden Kokkola, Terrafame and Outokumpu are part of the same value chain, and they also provide an indirect route to exposure through the equity market.
The risks should be stated plainly. Industrial metals are not a safe haven. They fall in a recession at the same time as equities, which is exactly when the diversification benefit would be needed most. They are a cyclical and often tactical exposure, not a strategic position like gold.
Key takeaway: For beginner investors, industrial metals are typically part of a broad commodity basket, not a separate choice. For private banking clients, they are a tactical tool whose timing is difficult. For institutional investors, they are part of the cyclical side of the commodity allocation and often also a way to take a view on the energy transition without company-specific risk.
Industrial metals on Kvarn X
Exposure to copper, aluminium and broader metal baskets is built through exchange-traded ETPs. Compare the options on the Kvarn X Invest page. You can also get indirect exposure through shares in mining and metals companies, which brings company-specific risk into play.
For investors, the practical strength of commodity investing comes from being able to bring different implementation methods together in the same environment. On Kvarn X, this means digital investment gold on one side and exchange-traded ETF and ETP solutions on the other.
Kvarn X Gold offers a digital route to investment gold. Exchange-traded ETF and ETP solutions complement it. You can therefore build commodity exposure in several ways through the same platform, but the right structure depends on whether you are looking for ownership linked to physical gold or exchange-traded exposure.
Key point: ETF, ETC and ETP solutions are best thought of first and foremost as structures, not as an investment thesis. The same commodity can look very different depending on whether the product is physically backed, futures-based or implemented through company risk.
| Goal | Typical instrument | What you own in practice | Example path on Kvarn X |
|---|---|---|---|
| Direct ownership logic for gold | Digital physical ownership / solution linked to physical gold | Ownership linked to physical gold, or an equivalent right | Kvarn X Gold page |
| Exchange-traded precious metal exposure | Physically backed ETC/ETP | An exchange-traded security backed by physical metal | Invest page or an individual instrument page |
| Broader commodity exposure | ETF / ETP / commodity basket | Futures-based or index-based exposure to several commodities | Invest page |
| Indirect commodity exposure | Mining, energy or agricultural company | A business whose earnings depend on the commodity price | Shares and ETFs on Kvarn X |
For Finnish investors, taxation is an essential part of assessing commodity investments in practice. According to the guidance of the Finnish Tax Administration (Vero), investment gold is subject to a special rule for value added tax: the sale and intermediation of investment gold are exempt from VAT under certain conditions, and investment gold is a separately defined category of goods.
For exchange-traded securities, such as ETFs and ETPs, the Tax Administration places capital gains and losses within the scope of the taxation of securities. However, the tax treatment of an individual product should always be checked separately on the basis of its structure.
The most important lesson of this section is simple: if commodity exposure is implemented through different structures, the practical tax treatment can also differ. That is why taxation is not a side issue in commodity investing, but part of choosing the product.
Three natural ways forward
Compare ETF and ETP solutions on the Kvarn X Invest page, explore digital gold on the Kvarn X Gold page or see an example of an exchange-traded instrument physically backed by gold.
Commodities are a useful but easily misunderstood asset class. They are not a shortcut to safety, and they are not automatically better diversification just because they are different from equities. They can, however, be a justified part of a portfolio when the investor understands three things: which commodity they own, through which structure they own it and what role that holding plays in the portfolio.
In practical terms, the value of commodity investing for investors comes from the different implementation methods being genuinely available: digital investment gold on one side and ETFs and ETPs on the other. Kvarn X brings these options together in the same service.
Spot price: The price of a commodity for immediate delivery, in other words the market price right now.
Futures contract: A standardised contract to buy or sell a commodity at an agreed price on a specific date in the future.
Futures curve (term structure): The prices of futures on the same commodity that expire at different times, side by side.
Rolling: Replacing an expiring futures contract with one that expires later, so that the exposure continues. Depending on the shape of the futures curve, rolling can improve or weaken the return.
Contango: A situation in which later-expiring futures are more expensive than near-term futures. Rolling then weakens the return.
Backwardation: A situation in which later-expiring futures are cheaper than near-term futures. Rolling can then improve the return.
ETP: An umbrella term for exchange-traded investment products, such as ETFs, ETCs and ETNs.
ETC: An exchange-traded product that tracks the price of a single commodity or a commodity basket. A precious metal ETC can be physically backed.
Physically backed: A product backed by a stored physical commodity, usually a precious metal.
Commodity index: An index that tracks a basket of several commodities, such as the Bloomberg Commodity Index (BCOM).
Investment gold: Gold that is separately defined for VAT purposes and whose sale and intermediation are exempt from VAT under certain conditions.
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The information and sources presented are for illustrative purposes only. While obtained from sources deemed reliable, their accuracy cannot be guaranteed.
Commodities are raw materials and basic physical goods, such as gold, silver, oil, natural gas, copper, wheat, coffee and sugar. From an investor's point of view, they fall into four groups: precious metals, energy, industrial metals and agricultural commodities. The sources of return and risks of these groups differ clearly from one another.
There are four main routes: physical ownership, an exchange-traded product (ETC, ETP or ETF), shares in a company that produces the commodity, and futures- or derivatives-based exposure. The route determines what is actually in your portfolio and where the return comes from.
A physically backed product is backed by a stored commodity, usually a precious metal, so its value follows the price of the commodity. The return on a futures-based product is affected not only by the spot price but also by the futures curve and roll costs, so it can differ significantly from the price of the commodity.
There is no single right share. For most investors, commodities are a complementary layer rather than the core of the portfolio. In a small portfolio, the most natural starting point is usually a small weight in gold, while in larger portfolios commodities can form a strategic layer of their own.
Taxation depends on the method of implementation. The sale and intermediation of investment gold are exempt from VAT under certain conditions. Capital gains and losses on exchange-traded securities, such as ETFs and ETPs, are taxed under the rules for the taxation of securities. The tax treatment of an individual product should be checked on the basis of its structure.
The return on a commodity ETF or ETP does not always track the price of gold, oil or another raw material directly. In this article, we look at how a product's structure, futures rolling, currency, index and costs affect the return an investor receives, and what to check when comparing commodity products.
An ETF and an index fund are two different ways of reaching the same goal: the market return at low cost. Both track an index and offer broad diversification, but the difference lies in how they are implemented and in the rhythm of investing. An ETF moves at the pace of the stock exchange, while an index fund gets on with its work in the background. The difference comes down to how you buy, the rhythm and the psychological fit.
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