Commodities are the basic building blocks of the world economy. They are physical products used directly by consumers and industries to produce other consumer goods. There are several types of commodities, including:
- Energy Commodities (crude oil, heating oil and natural gas)
- Metals Commodities (gold, silver and copper)
- Agricultural Commodities (corn, wheat, rice, etc.)
- Soft Commodities (cocoa, coffee, sugar, etc.)
Commodity prices will be influenced by a variety of factors, including:
- Supply and demand
- Weather and geographical events
- Economic and political factors
- Value of the US dollar (the majority of commodity prices are in US dollars)
These products tend to be homogeneous in nature and play a fundamental role in the economy. Increased volatility can be seen when there are interruptions around the world, such as global or social unrest or unusual weather conditions.
Commodities like gold are popular with investors because they have long been regarded as a valued store and therefore a “safe haven”. These safe haven assets have historically maintained their value in times of economic and political uncertainty.