What are Commodities


WHAT ARE COMMODITIES?

Unlike foreign currency exchange or stocks, commodities are tangible forms of merchandise, usually in the form of raw materials. There are a few different ways of categorising commodities; some distinguish between soft commodities which are grown or bred and hard commodities which are typically extracted from the earth. However, if one wants to narrow down categories still further, it is possible to determine four main types of tradable commodity;

Metals & Energy

Metals

Metals Metals

This category encompasses both precious metals such as Gold, Silver and Platinum, and regular metals such as Copper and Aluminium.


Energy

This includes different forms of oil and natural gas, with heating oil and petroleum belonging in this category.

Meat and ​Livestock & Agriculture

Energy

Wheat Meat and Livestock

There’s considerable international appetite for meat, with Hogs and Cattle being amongst the most commonly traded commodities in this category.


Agriculture

This grouping covers foodstuffs that are grown, such as grains and beans, as well as things like sugar.

What is Commodity Trading?

What is Commodity Trading?

What is Commodity Trading?

What_is_Commodities_Trading

Commodity trading goes a long way back in time to the ancient system of bartering, but these days it’s somewhat more sophisticated. The price of commodities can by affected by events at a local or even at an international level. The weather, disease, war and good old fashioned supply and demand are just some of the factors that can influence price.

A good example from 2014 comes from the market for coffee. Brazil is the planet’s most prolific producer of Arabica coffee beans. A Brazilian drought at the start of the year sent coffee future markets soaring, sending prices to a two year high, before a significant level of rainfall in November 2014 saw them drop.

Another example is the rise in oil prices in the early months of the same year, after terrorist organisations issued threats to a number of leading oil-producing nations. The fear that oil supplies would become scarce saw prices soaring, yet later on in the year the easing of such supply worries, along with a boom in American Shale Gas and drop in Chinese demand, resulted in the price of oil falling by almost half.

These events demonstrate just how important a good knowledge of current affairs can be for traders, particularly when it comes to areas which relate to the markets that they might trade in.

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