• Agricultural products. We use agricultural products to feed and clothe ourselves.
• Metals. We use metals to build tools and weapons to improve our existence and protect ourselves.
• Energy. We use energy — coal, gas, oil, etc. — to warm our homes and power our factories.

The history of commodities parallels the history of mankind and development of civilization. Man’s survival and development are tied to his ability to harness natural resources. Throughout history, civilizations and nations have thrived or perished based on their ability to cultivate agricultural products, develop metals and harness energy. In fact, the early ages of man — the stone age, the bronze age, the iron age — are defined by man’s ability to utilize increasingly complex natural materials to make tools and weapons. Survival depended on man’s ability to process increasingly complex metals in order to compete against and/or trade with his neighbors.

Nations have been founded and civilizations destroyed over the control of natural resources. In 1524, Francisco Pizarro’s Spanish conquistadors destroyed the entire Inca civilization in a vicious campaign to corner the South American gold market. In the late 1800’s, the British fought the bloody Boer War over control of South Africa’s gold and diamonds. The Persian Gulf War precipitated by Iraq’s invasion of Kuwait was essentially fought to stabilize global oil markets. Global economists and environmentalists predict that the world’s next great war will be fought over control of essential natural resources — water and arable land — made scare by the effects of global warming.

Throughout history, the fate and wealth of nations has been dictated by the presence and control of natural resources. This will not change and presents opportunities from which savvy futures traders can profit.

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Because of the essential nature of commodities, in times of war and great turmoil, investors cling to commodities. For example, after the tragic events of 9/11, gold prices spiked as investors sought safety in the precious metal. Tragedy sends investors running to the basic, the dependable, the necessary, the things that are essential in our lives — to commodities. In times of trouble, investors consider certain commodities (particularly precious metals) to be safe havens for their money. It’s the end of the world scenario: In a devastated world without structure or law, gold will always have value. People will always be able to exchange gold for the things they need. Perhaps today the idea seems a little too Hollywood, but it persists, rooted in ancient human history throughout which gold has always signified wealth and power.

Inflation is another economic force that sends investors scurrying to buy up commodities. In uncertain times, people will always need the raw materials on which society is built and which are used to provide man’s basic needs — food, housing, clothing, transportation. While other sectors of the market languish as inflation rises, commodities will flourish. Gold, in particular, spikes during times of inflation. Because gold is the standard on which the world’s currency values are set, investors see gold as the ultimate hedge against inflation.

Commodities will not necessarily follow the stock market during times of economic pressure. Generally, commodities do well in periods of late expansion and early recession. As the economy slows, interest rates drop in an effort to stimulate the economy (witness the Fed’s slow but steady drop in interest rates over the summer and into the fall in response to the home mortgage and credit crisis). Low interest rates spur commodity growth.

It is important to remember that business cycles are not exact and cannot be predicted with definite accuracy. But they do provide a historical perspective that futures traders can use to evaluate commodities markets. It is also important to realize that not all commodities follow the same cycle (wheat may peak in the spring; oil, in summer). At any particular time, however, futures traders can usually find rising and falling commodities from which they can profit. Understanding what drives the economy and how those forces impact commodities gives futures traders important information they can use to take advantage of and profit from movement in the commodities markets.

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Elastic goods exhibit a high correlation between price and demand. When the price of the good goes up, demand decreases. Elastic goods are generally less-essential goods, meaning that you can live without them or at least use less of them or substitute a less expensive option. The dance between price and demand can be complex. For example, when the cost of milk rises, people buy less milk and fewer milk products. Some people will stop buying milk altogether until the price comes back down. Families with young children who still need milk will serve their children less milk or milk with a lower fat content and, therefore, cheaper price tag. They may substitute enriched soy milk or calcium supplements and calcium-fortified breads and cereals to ensure their children get a full dose of bone-building calcium. Sales on cheese, ice cream and other dairy products will plummet in concert with how necessary they are perceived to be. Ice cream is considered a luxury so when ice cream prices rise, sales fall.

Inelastic goods are goods that are so essential that consumers must have them no matter the cost. Price fluctuations have only a small effect on the demand for inelastic goods. Consumers may buy less, but they will have to buy some in order to survive. For example, in America oil costs have reached record highs. While it is true that some people are trying to cut back — making fewer and more efficiently planned trips to accomplish errands, car pooling, patronizing mass transit, walking more — the bottom line is that most Americans are dependent on their car. In most areas, there are no other options, you must drive your own car to get to work, get the kids to school, get to the grocery, etc. You may moan and groan, but you will buy gas for your car, no matter what the cost.

Most commodities are fairly inelastic goods. Commodities are the raw materials of our daily lives, the building blocks from which our homes are built, our clothes are made, our food is grown. We cannot survive in our world without the natural resources that are traded on the exchanges as commodities. In fact, it is the essential nature of inelastic goods that attracts futures traders. As long as man exists, there will be demand for commodities — and a way for futures traders to profit.

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At the beginning of the 1848 Gold Rush, Sam Brannan, who owned a general store in Sutter’s Fort, discovered that John Sutter and James Marshall had discovered gold. Understandably, the discoverers wanted to keep the strike a secret. Brannan agreed, then quietly scoured northern California buying up every shovel, pick and pan he could find until he had cornered the market. He then went around town yelling, “We found gold!” and the Gold Rush was on. Hundreds of people flocked to northern California, all needing shovels, picks and pans to search for gold. And there was Sam, the only source for hundreds of miles around! Sam Brannan never lifted a shovel, never swung a pick, never shifted a pan in the search for gold, but he became the first millionaire of the Gold Rush — selling shovels.

There is often more than one way to profit from commodities. Money can be made not only by betting on the need for resources, but on the processing and transporting of those resources. Remember that futures trading is global. Creative thinking requires that you consider the need for resources in one part of the world and probable suppliers and processors who may be located in other parts of the world.

In thinking creatively about commodity futures markets, factor in the following and see where it leads you:

• Population. We are at the start of what is expected to be the greatest explosion in population growth in human history. The United Nations estimates that world population will increase by 1 billion people per decade for the first five decades of the 21st century. That means that the number of people on our planet will increase from 6.5 billion today to 9 billion by 2050. Population growth has become exponential. In the 19th century it took 130 years to add 1 billion lives to the planet. Barely 200 years later in the 21st century, it takes just 13 years. More people means greater demand for natural resources (i.e., commodities). Greater demand means rising commodity prices.
• Urbanization. People need a place to live and are increasingly being lured to cities where the bulk of the world’s jobs can be found. The exponential growth in population is being accompanied by the greatest increase in urban development the world has ever seen. In the early 20th century, less than 15% of the world’s population lived in cities, according to United Nations statistics. In 2005, 50% of the world’s population lived in cities. By 2030, the U.N. predicts that 60% of the world’s people will be crowded into cities. People in urban areas consume more natural resources than those in rural areas where life is more sustainable. As urban areas expand, more natural resources and industrial metals will be needed to provide the necessary infrastructure: houses, roads, buildings, cars, hospitals, schools, etc. Whereas cities may have been initially located near plentiful natural resources, the mega-cities of the future may require resources from across the globe.
• Industrialization. In the 19th century, the first industrial revolution transformed Western Europe and North America. While industrialization has slowly been creeping across the globe during the past century, we are now poised for a second major industrial revolution in what are called the BRIC countries: Brazil, Russia, India and China. The need for natural resources in these countries is enormous and rising fast, pushing up commodity prices as demand rises. In the next few decades, China is expected to become the world’s largest consumer of commodities. In 2004, China used half the cement, a third of the steel, a quarter of the copper and a fifth of the aluminum produced in the world and was second only to America in oil consumption.

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So here’s the question: If futures trading is so risky, why do I and so many others choose to take that risk? The answer is simple: Money. Trading commodity futures may be risky, but there is potential for enormous profit. Some of the world’s greatest fortunes have been built around commodities:

• Banking patriarch Mayer Rothschild amassed a fortune during the Napoleonic Wars by hoarding and distributing gold bullion to fund the British.
• John D. Rockefeller, Sr., in his day, the richest man in America, built his impressive fortune on oil, forever changing the global oil industry through creation of the Standard Oil Company.
• Self-made steel magnate Andrew Carnegie consolidated the American steel industry, founding the company that would eventually became behemoth U.S. Steel and in the process accumulating a fortune second only to Rockefeller’s.
• Abdel-Aziz Al-Saud, the first king of Saudi Arabia, created a nation and amassed unbelievable personal wealth through consolidation and control of crude oil and natural gas.
• Lakshmi Mittal, the Indian steel magnate, used his knowledge of the steel industry to become the fourth wealthiest person in the world in 2004.
• In 2005, legendary oil man T. Boone Pickens made a cool $1.4 billion betting on the price of oil and natural gas.

Most of us who trade commodity futures will never reach the storied peaks of the world’s legendary commodity kings, but there are plenty of commodity traders who have made a very nice pile through steady trading. There is plenty of “gold” to be found trading futures on the commodity markets. All you need to do to build your own fortune is to consistently make more than you lose.

With the right system, the right signals, the right tools, the right attitude and some patience and persistence, you can “win” as a futures trader. I’ve already done it and I can show you how. If you want to learn the skills you need to succeed as a futures trader, click the link for complete information on my Futures Secrets Trading System. Read testimonials from satisfied clients, now successful futures traders themselves. Click here for details on Futures Trading Secrets.

Though some suspect the ancient Phoenicians and Greeks may have dabbled in futures trading, the modern futures market was born in Chicago with the establishment of the Chicago Board of Trade in 1848. Know as the hog butcher to the world, Chicago was also the commercial hub connecting Midwestern plains farmers with East Coast food merchants. Telegraph lines, railroads and shipping all passed through Chicago. It was to Chicago that Midwestern farmers came in the 1840s to sell the wheat that fed the world.

The crystal ball tells all . . .

Starting with the exchange of cash for the immediate delivery of wheat, trading gradually evolved into futures contracts in which a farmer would agree to deliver so many bushels of wheat to a dealer by a certain date in the future for an agreed price. Both parties benefited. The farmer knew how much he would be paid when he harvested his crop, and the dealer knew what his costs would be and how much wheat he could supply to his customers. Written contracts were often exchanged, sometimes with “guarantee” money. The Chicago Board of Trade (CBOT) came into being as a centralized location where buyers and sellers could meet, negotiate and finalize a contract. The first standardized “exchange traded” futures contract was listed on the CBOT in 1864.

Show me the money . . .

Contracts soon became so common that banks started accepting them as collateral for loans. Contracts also started to change hands before the delivery date. A farmer who couldn’t deliver his wheat might pass his obligation onto another farmer. A dealer who didn’t need the wheat might sell the contract to a dealer who did. Weather, locusts, disease, big harvests, flood, war, drought — all played a part in determining the final price of wheat when the crops were finally brought to market. In the interim, the contracts were traded back and forth. Soon the opportunity to make money on the trades attracted investors with no interest in the grain but a huge interest in the money! And the futures trader was born!

How to get some for yourself . . .

Today there are futures exchanges for wheat, eggs, petroleum, currency, metal, and other commodities. Futures trading still attracts people interested in those commodities and those who are fascinated by the potential to make money — lots of money. We can teach you how to do it! Click here to go to the Futures Trading Secrets website. Learn how to maximize your earning potential as a futures trader. The Futures Trading Secrets Course will teach you the success factors you need to master to make you a winner in the market. Click here to order the Futures Trading Secrets Course today.