What is a Commodity?

Commodity markets are markets where raw or primary products are exchanged. A commodity is a food, metal, or another fixed physical substance that investors buy or sell, mostly in its raw state.

Often traded using futures contracts raw commodities are bought and sold on regulated commodities exchanges around the world including the USA, Japan and Europe.

Although there are many generic, largely unprocessed, goods that can be processed and resold, the primary commodities that an investor will recognise are oil, gold and agriculture products.

Commodity Markets

Commodity markets are varied around the World but all trade in similar commodities. The top 5 commodity markets around the World include:

  • New York Mercantile Exchange USA
  • Tokyo Commodity Exchange Japan
  • NYSE Euronext EU
  • Dalian Commodity Exchange China
  • Multi Commodity Exchange India

Commodities Traded

Energy

One of the most sort after and highly traded commodity categories, energy includes Crude Oil, Ethanol, Natural Gas, Propane and Uranium. Oil is the most highly traded commodity worldwide and comes in many forms ranging from crude to more refined materials.

Agriculture

The agriculture category contains an array of farmed commodities including Corn, Rice, Soy, Wheat, Cotton and Sugar. These raw farmed products are traded in large quantities over several commodity markets.

Precious Metals

Precious metals are valuable metals including Gold, Silver and Platinum. Precious metals have many industrial uses and are a popular commodity for investor because of their high value and demand. Precious metals are traded using the troy ounce imperial method, a weight system which is now solely used for metals.

Industrial Metals

Consisting of metals which are further refined into countless products for everyday use. Industrial metals occupy a large category in the London Metal Exchange. Traded in metric tons, industrial metals include Copper, Lead, Zinc, Aluminium and Nickel and a recent edition to commodity exchange markets, Steel.

Environmental Commodities

Recently environmental resources have been established in the commodity markets. Investors Carbon registries, Renewable Certification and Energy Efficient Credits are somewhat service commodities which have been increasing in demand and value since the introduction of the Kyoto Protocol.