Commodities

Dive into the heart of global trade and economic equilibrium through our comprehensive commodities section which play pivotal roles in our lives and industrial advancement. These tangible resources are actively traded on commodity exchanges across the globe.

Commodities

Dive into the heart of global trade and economic equilibrium through our comprehensive commodities section which play pivotal roles in our lives and industrial advancement. These tangible resources are actively traded on commodity exchanges across the globe.

A BEGINNER’S GUIDE TO Commodities

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Key Terms

Commodities

DEFINITION
Raw materials or primary agricultural products that can be bought and sold, such as gold, oil, or wheat.

 

Hard Commodities

DEFINITION
These are typically natural resources that are mined or extracted. Examples include gold, oil, and natural gas.

 

Soft Commodities

DEFINITION
These are agricultural products or livestock. Examples include wheat, coffee, and pork.

 

Futures Contract

DEFINITION
A legal agreement to buy or sell a commodity at a predetermined price at a specified future date. They are standardized in terms of quality and quantity.

 

Spot Price

DEFINITION
The current market price at which a commodity can be bought or sold for immediate delivery and payment.

 

Speculator

DEFINITION
An individual or entity that trades commodities or their futures contracts with the aim of profiting from price changes, rather than intending to actually take delivery of the commodity.

 

OPEC

DEFINITION
An intergovernmental organization of 13 nations, founded to coordinate and unify petroleum policies among its member countries.

 

Supply

DEFINITION
The amount of a commodity available for purchase or sale.

 

Brent Crude

DEFINITION
A major global benchmark for oil prices, sourced from the North Sea.

 

West Texas Intermediate (WTI)

DEFINITION
A grade of crude oil used as a benchmark in oil pricing, sourced from the U.S.

 

Explore Commodities

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Frequently Asked Questions

1. What are commodities?
Commodities are raw materials or primary agricultural products that can be bought and sold in the market. Examples include gold, oil, natural gas, wheat, corn, and coffee.
2. How can I invest in commodities?
Investors can invest in commodities through various avenues, such as futures contracts, exchange-traded funds (ETFs), mutual funds, commodity-focused stocks, and commodity derivatives.
3. Why do people invest in commodities?
Investing in commodities can provide portfolio diversification, act as a hedge against inflation, and offer potential opportunities for profit during periods of supply and demand imbalances or economic fluctuations.
4. What is the difference between hard and soft commodities?
Hard commodities are natural resources extracted from the earth, such as metals (gold, silver) and energy resources (oil, natural gas). Soft commodities are primarily agricultural products (wheat, corn, soybeans, coffee).
5. How are commodity prices determined?
Commodity prices are influenced by various factors, including global supply and demand dynamics, weather conditions, geopolitical events, government policies, economic trends, and currency fluctuations.
6. Are commodity prices volatile?
Yes, commodity prices can be highly volatile due to factors like weather-related disruptions, geopolitical tensions, shifts in global demand, and supply chain disruptions. This volatility can present both risks and opportunities for investors.
7. What is a futures contract?
A futures contract is an agreement to buy or sell a specified quantity of a commodity at a predetermined price on a future date. It allows investors to speculate on the future price movements of commodities.
8. Are commodities affected by inflation?
Commodities are often considered as a hedge against inflation. As the general price level rises, the prices of commodities can also increase, making them potentially attractive for preserving purchasing power.
9. What are the risks of investing in commodities?
Commodity investing carries risks, including price volatility, market speculation, geopolitical uncertainties, regulatory changes, weather-related risks (for agricultural commodities), and risks associated with commodity-related companies.
10. Can I physically own commodities?
While it’s possible to physically own certain commodities like gold or silver by purchasing and storing them, most commodity investments are done through financial instruments like futures contracts, ETFs, or commodity-based securities rather than physical possession.
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