A commodity is an economic good, usually a resource, that has full or substantial fungibility. Most of commodities are raw materials, basic resources, agricultural, or mining products, such as sugar, grains, coffee bean, tea and iron ore.

Note: According to Bloomberg News on 18 September, 2015, U.S. regulators formally define cryptocurrencies, such as Bitcoin, as commodities, which are the same as crude oil or wheat.

Markets for trading commodities can be very efficient. These markets will respond to changes in supply and demand to find an equilibrium price and quantity quickly. Moreover, investors can gain passive exposure to the commodity markets through a commodity price index.

Because inflation hurts ordinary investment products, trading commodities can protect investors from inflation. This is because when the prices of goods or services rise, the value of the commodities needed will also rise. Accordingly, if your portfolio includes certain commodities, you may be able to reduce losses owing to inflation.

In the financial market, commodities are homogeneous, tradable, and widely used as industrial basic raw materials, such as crude oil, non-ferrous metals, agricultural products, iron ore and coal.

Commodities are divided into three categories: energy commodities, basic raw materials and agricultural products.

Commodities can be designed as futures and options as financial instruments to trade. Since commodities are mostly industrial basic raw materials, which are in the most upstream, the changes in futures and spot prices that reflect their supply and demand relationships will directly affect the entire economy. For example, rising copper prices will increase industries such as electronics and construction. Investors should pay close attention to the supply and demand and price changes of commodities.

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You can explore our new JRFXOne mobile app and choose from commodities markets around the world.

Risk Warning: The above content is for reference only, and does not represent JRFX’s position. JRFX does not assume any form of loss caused by any trading carried out in accordance with this article. Please consult your financial planner for your investment portfolios and manage your own risk.

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