What are Commodity Markets?

Physical or virtual marketplace for buying, selling, and trading products. Commodities such as gold, and other resources that are minded, are considered hard commodities. Conversely, soft commodities are agricultural products or livestock.

Commodities markets have existed in some way or form since 4000BC, beginning with Sumerian civilization. Sumerians used clay tokens and clay writing tablets to symbolize the number of goods to be delivered. This was perhaps the first example of futures contracts. Futures are considered the oldest method of investing in commodities. They are legal contracts to buy and sell goods at a preset price, at a specific date in the future. Futures are always secure by physical goods. Commodities markets grew in earnest by the 10th century and continue as a means to allocate goods globally.

Commodities are mostly traded online. However, trading can be conducted without the regulation of exchanges in a method called over-the-counter. There are two categories of commodities, hard and soft. Hard commodities are generally natural resources that are removed through either mining or extraction. This includes precious metals such as platinum, radium, silver, and gold or other natural resources like rubber and oil. Soft commodities include livestock and agricultural products including wheat, coffee, and beef.

Investors can invest in commodities in multiple ways–buying stock in commodities-based corporations, investing in an index or mutual fund, investing in exchange-traded funds, or purchasing futures contracts.

The Top 10 Global Commodity Markets include the following:

  • London Metal Exchange (LME): United Kingdom-Futures exchange.
  • Climax: Holland-Energy and environmental commodities.
  • Chicago Mercantile Exchange (CME): United States-Commodities market
  • New York Mercantile Exchange (NYMEX): Unite States: Commodity futures exchange
  • Dubai Mercantile Exchange (DME): Middle East-Energy future exchange
  • Zhengzhou Commodity Exchange (ZCE): Asia-Commodities future exchange
  • Tokyo Commodity Exchange (TOCOM): Asia-Option and futures contracts for commodities.
  • Singapore Exchange Limited (SGX): Asia-Futures and options.
  • Australian Securities Exchange (ASX): Australia-Commodities

What people ask…

What are the types of commodity markets?
What is commodity buying?
How does commodity market work?
Which is an example of a commodity?

See Also…

Asset Class, Ask, Bid, Hard Commodity

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