Oil, gold, wheat, livestock. Commodities are the basic building blocks of the global economy. Natural resources traded on dedicated exchanges around the world. Commodities come in two types: soft, which are typically agricultural like rice or sugar, and hard, those made up of metals or energies like silver and gas. The production and consumption of commodities depends on many factors, including: supply and demand, the weather, economic and political events and the dollar, as commodities are normally priced in US currency, meaning commodity prices can fluctuate significantly.
So, how do you trade them? Commodities are bought and sold on a number of exchanges specialising in particular markets. For example: NYMEX, in New York, LIFFE, in London, or the SHME in Shanghai. They are generally traded as futures contracts, which are simply agreements to exchange an asset at an agreed price and date in the future. future. This enables you to trade the contracts themselves without ever having to own the underlying asset. But remember, commodity prices can be very volatile, so it’s vital to keep an eye on the potential downside when placing a trade.
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