Understanding Commodities


Commodities are basic materials that are used in commerce, which can be interchangeable with a product of the same type. Examples include grains, gold, meat, oil and natural gas. 


Commodities are typically used as inputs in the production process of other goods or products. Precious metals, such as gold, are used as store-of-value investments, helping investors to avoid inflation.


The quality of commodities can differ slightly, though they have to meet a certain standard to be traded on an exchange. Investors can buy and sell commodities directly or by using derivatives.


Technological advances have led to the development of new commodities. It is now possible to trade things like internet bandwidth or smart phone minutes  across commodity markets.

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