What are Commodities?
Commodities are things that people buy and sell. They are finished products as well as basic raw materials. Any tangible thing that is bought and sold can be considered a commodity. Securities, the shares of ownership of a company (common stock) and the debt obligations of companies, municipalities, and the federal government and its agencies (bonds), have traditionally been traded and regulated separately from commodities. However futures contracts have arisen on things that historically haven’t been considered as commodities, such as foreign currencies and stock indexes etc., Commodities has taken on and will continue on significantly broader dimensions.
Commodities, in the investment sense, include sugar, wheat, cattle, cotton, tin, gold, various industrial raw materials and many other items. For the commodities speculator, the term refers also to a type of investment called commodity futures contracts,” which offer the speculator the possibility of a profit on market price fluctuations. Commodity futures contracts are standardized contracts to purchase a particular quantity of some commodity on a particular date at a particular price. These contracts are traded by hedgers and speculators at prices reflecting the supply of, and demand for, the underlying commodity. Commodity futures are generally considered highly speculative. They provide no income and no guarantee of their future value.
