The commodity market is a financial market that deals with raw materials and one of the foundations of the global trade system. It’s also known as a ‘primary economic sector’. With NetMarkets every trader can access the major commodity markets such as oil and precious metals. They are natural resources traded on exchanges around the world.
Commoidies are often divided into two groups:
- Soft Commodities (for example: Coffee/Cocoa)
- Hard Commodities (for example: Metal/Oil)
A commodity is a basic good or raw material in commerce that traders can buy and sell. Commodities are often the building blocks for more complex goods and services.
The production of commodities is dependent on many different factors, such as: Supply and demand; weather impacts; the US dollar (usually priced against) and economic and political sentiment. All of These factors mean that commodities can fluctuate significantly.
Previously if you wanted to benefit from the price change of a commodity, you had to physically purchase and store it. However, now you’re able to invest in the price of different commodities in the form of CFDs (Contract for Difference).
There are a number of reasons to trade commodities including: Population Growth, Inflation Hedge, and Portfolio Diversification. With the right approach, commodities investments can be a profitable addition to an investment portfolio.
When you trade commodities in the form of CFDs you invest in the price - you don’t physically own it.
Commodities are also traded as futures contracts. These are agreements that trade assets at an agreed price and date in the future. It therefore enables you to trade the contracts without having to own the underlying asset.