Commodities
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Join →What Are Commodities?
Commodities are tradable physical goods or standardized raw materials. Major commodity groups include energy products, metals, and agricultural products.
Examples include crude oil, natural gas, gold, silver, wheat, and coffee. We can gain commodity exposure through different instruments, including futures, ETFs, and certain shares or derivatives.
What Influences Commodity Prices?
Commodity prices can be strongly affected by physical supply and demand, inventories, weather, production capacity, geopolitical events, transportation, currency movements, and global economic activity.
The instrument through which we trade a commodity matters. Holding a physical commodity, trading its futures contract, and buying an ETF linked to it can create different costs, risks, and exposures.
Key Terms
Commodity, energy, metals, agriculture, supply, demand, inventory, futures.
Knowledge Check
- Name three major commodity groups.
- Why can weather affect commodity prices?
- Why does the chosen trading instrument matter when gaining commodity exposure?