Trading in commodities creates portfolio diversification, as the commodity market prices move independent of other assets. Gold, one of the most popular instrument, is often considered as a safe haven, especially in troubled times.
The safe-haven investment, gold, has historically reacted negatively to increases in the dollar and bond yields. During times of economic turmoil, gold appeals as a safe haven investment, while demand for metals and energy falls, and vice versa.
For example, in 2020, when the global equities market, currencies, and bond markets were under pressure due to the global outbreak of COVID-19, demand for energy and metals was also down, resulting in a drop in prices to multi-year lows, while gold—a safe-haven metal—soared to an all-time high. Crude oil prices even fell into the negative territory for the first time in commodities trading history.