Commodities
Raw materials or primary agricultural products that can be bought, sold, and traded.
Definition
Commodities are basic goods used in commerce that are interchangeable with other goods of the same type. They fall into two categories: hard commodities (natural resources like gold, oil, and copper that are mined or extracted) and soft commodities (agricultural products like wheat, coffee, cotton, and livestock). Commodities are traded on exchanges through futures contracts, ETFs, or direct physical ownership. They serve as inflation hedges because their prices tend to rise when the purchasing power of currency falls. Gold is the most well-known commodity investment, often called a safe-haven asset. Commodity prices are influenced by supply and demand, geopolitical events, weather, and currency movements.
Related Terms
Futures
Standardized contracts to buy or sell an asset at a predetermined price on a specific future date.
EconomyInflation
The rate at which the general level of prices for goods and services rises, eroding purchasing power.
InvestingDiversification
Spreading investments across various assets to reduce risk.
CommoditiesGold
A precious metal widely used as a store of value, inflation hedge, and safe-haven investment.