Commodities Market

A commodities market is a physical or virtual market that is mainly used for trading, selling and buying of goods. Worldwide, there are about fifty commodity markets in which investment trading of about 100 primary commodities take place. There are mainly two types of commodities – hard and soft commodities. The hard commodities include natural resources that can only be mined or extracted and the soft commodities include livestock or agricultural products such as sugar, coffee, soya bean, wheat etc.

An investor can invest in commodities in several ways. He can either purchase stock of corporations that primarily depends on the prices of commodities or purchase exchange traded funds, mutual funds or index funds from companies that mainly focuses on industries related to commodities. Physical trading or derivative trading can be used in commodities market by making use of forwards, futures, options on futures and spots. For the purpose of price risk management, farmers have been using a derivative form of trading in the commodity market.

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Edited and Updated 31st May 2014

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