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.
As prices are more influenced by identified contributing factors, commodity markets are easier to understand. Following are some examples for traditional commodities,

  1. Oil
  2. Natural Gas
  3. Platinum
  4. Gold

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?

Commodities usually place on exchanges as options as well as futures, often become hubs for some of the commodities specialised in. For example, Chicago Mercantile Exchange (CME), NYMEX and Chicago Board of Trade (CBT).