Tradable commodities are globally important goods that significantly affect global commerce. They are grown, harvested, or extracted from the environment in huge quantities, and typically used in the production of other goods and services.
Popular commodities that investors trade include:
As tradable goods, these commodities are quoted on exchanges as a certain value per volume, weight, or some other unit of measurement. The price of commodities fluctuates according to numerous factors including changes in forecasted future demand or supply, geopolitical issues, seasonal and weather conditions, market risk sentiment, among many other reasons. The significance of each factor changes depending on the commodity in question.
Investors can purchase contracts for the right to buy or sell the actual physical commodities, or derivatives such as CFD’s (contracts for difference) that grant exposure to the changing prices of commodities, without the obligation to physically handle, transport, and store the commodities.
When you buy a commodity CFD, you are expecting the price of the commodity to increase. Conversely, when you sell a commodity CFD, you are expecting the price of the commodity to decrease.
Commodities can be classified in two ways. They can be classified as either ‘Energy’, ‘metals’, and ‘agriculture’, or they can be classified as either ‘hard’ or ‘soft’.