What are Commodities?
Anyone who drives a car can become significantly impacted by rising crude oil prices. The impact of a drought on the soybean supply may influence the composition of your next meal. Similarly, commodities can be an important way to diversify a portfolio beyond traditional securities – either for the long term or as a place to park cash during unusually volatile or bearish stock markets, as commodities traditionally move in opposition to stocks.
Along with the global currency exchange markets, commodity markets offer various investment opportunities for retail traders worldwide. Commodities, whether they are related to food, energy or metals, are an important part of everyday life. A commodity is simply a physical substance traded on an exchange. Typical commodities include “energy” (such as crude oil), “metals” (such as gold and silver) and “soft” commodities (foodstuffs such as sugar, wheat and coffee).
Precious metals like Gold and Silver are tradable instruments classed as a commodity, therefore making their price relatively uniform across the world. In addition, Gold and Silver are characteristically limited in supply, which means that they tend to be of higher value. Where Gold is used as the main safe-haven asset, Silver is typically used in industrial production. Therefore, it’s more susceptible to price fluctuations from changes in business conditions.