Traders in the commodity market speculate on the price of raw materials like oil and gold. The market can be very volatile, which makes it risky to trade. However, if you’re well-informed and have a good strategy, you can make a lot of money with commodities.
Investing in commodities can diversify your portfolio and help you hedge against inflation. You can buy and sell raw materials through futures contracts, which are prices that indicate the quantity and quality of a physical commodity at a certain date in the future. These contracts are traded in the global commodity markets, where you can find a variety of products ranging from energy to agricultural goods.
The history of commodity trading goes back centuries as tribal clans and newly established kingdoms bartered for food, supplies and other necessities. Today, it’s a booming international business with exchanges and derivatives markets worldwide. The Chicago Board of Trade launched modern commodity trading in the United States in 1848, and it continues to handle many of the nation’s most popular commodities today.
The most common commodity products include metals, energy and agriculture. Agricultural commodities include foods like cocoa, cotton and coffee as well as livestock such as hogs and cattle. Industrial crops like soybeans and palm oil are also commonly traded, as are metals like base metals (copper, iron or zinc) and precious metals (gold, silver and palladium). Environmental commodities like carbon emissions and white certificates are also commonly traded.