A commodity market is a market where prices of different commodities are traded. This market provides a great deal of information about the price of different commodities, which can be used by business entities to make decisions. This information is valuable to manufacturers and wholesale traders, as they can use it to determine retail prices. But there are also risks to the market.
In a commodity market, there are two types of contracts: the forward and the future. Forwards involve immediate delivery, while futures involve future delivery, often with the buyer closing the position before it is delivered. Both options and futures are traded through exchanges, and are both speculative. The commodities traded can be energy products such as oil, gold, or natural gas, agricultural products like corn, wheat, or livestock, and precious metals such as silver and platinum.
In the commodity market, commodities are traded in bulk. Energy goods include natural gas, oil, uranium, ethanol, coal, and electricity. In addition, agricultural commodities include sugar, cocoa, spices, grains, and livestock products. A person can earn money in different sectors by trading in commodities.
Commodities are traded on futures markets and spot markets. On the spot market, buyers pay the current spot price of commodities while in a futures market, buyers purchase contracts. Commodities are typically classified into two types: hard and soft commodities. Soft commodities are agricultural products, while hard commodities are natural resources.