Commodity

Commodities are typically grouped into categories: energy, such as crude oil and natural gas; metals, including precious metals such as gold and silver and industrial metals such as copper and aluminium; and agricultural products, such as wheat, corn, soybeans, coffee and livestock.

A key feature is that commodities are standardised. A barrel of a specific grade of oil is essentially the same regardless of who produced it, so commodities are priced mainly by supply and demand rather than by brand.

For example, the price of coffee can rise sharply if poor weather damages crops in a major producing country, affecting coffee companies and consumers worldwide.

Commodities are traded in spot markets and through futures and other derivatives. Investors gain exposure through futures, commodity funds and shares of producers. Commodity prices can be very volatile, affected by weather, geopolitical events, economic growth and currency movements. Some investors hold commodities, especially gold, as a hedge against inflation or market turmoil.