Commodity
A raw material or primary agricultural product that is interchangeable with others of the same grade and traded on organized exchanges.
A commodity is a physical good that is fungible — one unit is interchangeable with any other unit of the same grade. This standardization is what allows commodities to trade on centralized exchanges with transparent pricing.
Commodities are broadly grouped into four sectors: energy (crude oil, natural gas, gasoline), precious metals (gold, silver, platinum), base metals (copper, aluminum, zinc), and agricultural (corn, wheat, soybeans, softs like coffee and sugar).
Prices are driven by supply-demand fundamentals, geopolitical factors, currency moves, and seasonal patterns — making commodities a distinct asset class with low long-run correlation to equities.
Related Terms
Agricultural Commodities
Farm-produced goods traded on futures exchanges — grains (corn, wheat, soybeans), oilseeds, and livestock — with prices driven by weather and seasonal crop cycles.
BeginnerAsset
Anything with economic value that can be owned, traded, or used to generate returns — stocks, bonds, currencies, commodities, crypto.
BeginnerBase Metals
Industrial metals — copper, aluminum, zinc, nickel, lead, tin — that trade primarily on the LME and are closely tied to global industrial output.
BeginnerBenchmark Price
A widely accepted reference price for a commodity that other grades, contracts, or products are priced against — WTI, Brent, Henry Hub, and COMEX gold are key examples.
BeginnerCommodity Index (GSCI / BCOM)
A rules-based basket of commodity futures — the S&P GSCI is production-weighted and energy-heavy; the Bloomberg Commodity Index (BCOM) is diversified with per-commodity caps.
AdvancedCopper
The leading base metal and economic bellwether, nicknamed "Dr. Copper" for its ability to signal global economic health via demand from construction and manufacturing.
IntermediateEnergy Complex
The collective term for energy-related commodities — crude oil, natural gas, refined products (gasoline, heating oil, diesel) — and the markets and instruments around them.
BeginnerFutures Curve
The graph of futures prices across successive delivery months for a commodity, revealing whether the market is in contango or backwardation.
IntermediateGrade / Quality Spec
The standardized quality specifications a commodity must meet to be deliverable against a futures contract — API gravity and sulphur content for crude oil, purity for metals.
IntermediateSofts
Agricultural commodities that are grown rather than mined or extracted — primarily coffee, sugar, cocoa, cotton, and orange juice, traded on ICE Futures.
IntermediateSpot Price
The current market price at which a commodity can be bought or sold for immediate delivery.
BeginnerSupply and Demand Balance
The net difference between commodity production and consumption in a given period — a surplus weakens prices; a deficit strengthens them.
Intermediate