Commodities are basic goods consumed by people which are interchangeable with other goods in the same type. This plays an important role in global economics. Generally, commodities are used as the inputs of another to the production of another good. Commodities must meet specified standards which are known as basic grades that change rapidly on an annual basis.
The purpose of having a commodity market is in order to provide security and more efficient prices of the commodity. For example, if there is a price change in gold, that will be in concern with the jewellry market.
How do commodities trade?