What are commodities?

Commodities are sometimes mistaken for "mass" goods. They refer to tangible assets, including agricultural products, raw materials, energy and metals, which are usually used as basic things for the production of goods and the provision of services in daily life. The "bulk" in commodities comes from the English word "bulk stock", which generally refers to the large number of such assets or the large scale of transactions, and also involves considerable storage space. Since these commodities are closely related to the consumption of the general public, the supply and demand are quite large, which can directly affect the basic livelihood of the people and even the income of an entire country. Therefore, they naturally become an important part of the international trade and financial markets.

Major commodities are generally divided into four categories:

• Agricultural products - including edible crops (corn, barley, soybeans, cocoa, coffee, orange juice, sugar) and livestock (lean pigs, live cattle, etc.)
• Raw materials - including cotton, wood, rubber, etc.
• Energy - including natural gas, crude oil, coal, etc.
• Metals - including base metals and non-ferrous metals (iron ore, zinc, aluminum, nickel, steel) and precious metals (gold, silver, palladium, platinum)

What are the most commonly traded commodities?

In the financial market, the most commonly traded commodities are gold, silver, crude oil, corn, soybeans, etc. Therefore, most investors think of the oil market and the gold market in the commodity market . The oil market is mainly composed of the trading of Brent crude oil (BRENT) in the North Sea of ​​the United Kingdom and West Texas Intermediate crude oil (WTI) in the United States. However, it should also be noted that due to the natural nature, scarcity and time limit (such as spoilage) of commodities, the trading of individual commodities will change due to some economic environment and seasonal factors (such as harvest or failure). Therefore, one of the characteristics of commodities is that the price fluctuates greatly.

Commodities are important, but their supply and demand are not stable. For this reason, both buyers and sellers in the market tend to avoid the risks brought by price fluctuations. Therefore, in the financial market, trading commodities in the form of futures naturally came into being. The purpose is to lock in a forward price and hedge risks.

In addition, Bitcoin, which has emerged in recent years, is also called digital currency, virtual currency, etc., and has been under discussion for many years whether it is a type of currency. However, the market currently tends to define it as one of the commodities, and the U.S. Commodity Futures Trading Commission (CFTC) has launched and developed Bitcoin futures trading, bringing it under the scope of supervision, further confirming its commodity status.