Commodity Market
A Commodity Market is a financial market that trades primary commodities.
- Context:
- It can (typically) be a Regional Commodities Market, such as a U.S. commodities market.
- It can range from being a Hard Commodities Market (for hard commodities) to being a Soft Commodities Market (for soft commodities).
- Example(s):
- Petroleum Market, Wheat Market, ...
- a U.S. Commodities Market, such as a U.S. Commodities Exchanage (such as Chicago Board of Trade (CBOT) and a New York Board of Trade (NYBOT)).
- a Japanese Commodities Market, ...
- a Gold Bullion Market? (for gold bullion).
- …
- Counter-Example(s):
- a Stock Market.
- See: Soft Commodity, Spot Price, Forward Contract, Futures Contract, Option (Finance), Low-Cost Consumer Product.
References
2022
- (Wikipedia, 2022) ⇒ https://en.wikipedia.org/wiki/Commodity_market Retrieved:2022-11-27.
- A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit and sugar. Hard commodities are mined, such as gold and oil. Futures contracts are the oldest way of investing in commodities. Commodity markets can include physical trading and derivatives trading using spot prices, forwards, futures, and options on futures. Farmers have used a simple form of derivative trading in the commodity market for centuries for price risk management.[1]
A financial derivative is a financial instrument whose value is derived from a commodity termed an underlier.[2] Derivatives are either exchange-traded or over-the-counter (OTC). An increasing number of derivatives are traded via clearing houses some with central counterparty clearing, which provide clearing and settlement services on a futures exchange, as well as off-exchange in the OTC market.[3]
Derivatives such as futures contracts, Swaps (1970s-), Exchange-traded Commodities (ETC) (2003-), forward contracts have become the primary trading instruments in commodity markets. Futures are traded on regulated commodities exchanges. Over-the-counter (OTC) contracts are "privately negotiated bilateral contracts entered into between the contracting parties directly".[4][5]
Exchange-traded funds (ETFs) began to feature commodities in 2003. Gold ETFs are based on "electronic gold" that does not entail the ownership of physical bullion, with its added costs of insurance and storage in repositories such as the London bullion market. According to the World Gold Council, ETFs allow investors to be exposed to the gold market without the risk of price volatility associated with gold as a physical commodity.[6] [7] [8]
- A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit and sugar. Hard commodities are mined, such as gold and oil. Futures contracts are the oldest way of investing in commodities. Commodity markets can include physical trading and derivatives trading using spot prices, forwards, futures, and options on futures. Farmers have used a simple form of derivative trading in the commodity market for centuries for price risk management.[1]
- ↑ "Opportunities and Risk: an Educational Guide to Trading Futures and Options on Futures" (PDF). Chicago, Illinois: National Futures Association. 2006. p. 6.
- ↑ O'Harrow, Robert (21 April 2010). "A primer on financial derivatives". Washington Post.
- ↑ "Understanding Derivatives: Markets and Infrastructure - Federal Reserve Bank of Chicago". Chicagofed.org. Retrieved 23 August 2018.
- ↑ "The Regulation of Derivatives in Canada". Expert Panel. 2007.
- ↑ Loder, Asjylyn (18 July 2010). "Commodity Manipulation May Be Easier to Prove After Overhaul". Bloomberg.
- ↑ Bytom Lauricella (2 November 2009). "Gold Mutual Funds Vs. Gold ETFs: It Depends on the Goal". Wall Street Journal. Retrieved 3 October 2011.
- ↑ "The Future of Commodity ETFs". Morningstar. 25 August 2009. Retrieved 3 October 2011.
- ↑ This article covers physical product (food, metals, energy) markets but not the ways that services, including those of governments, nor investment, nor debt, can be seen as a commodity. Articles on reinsurance markets, stock markets, bond markets, and currency markets cover those concerns separately and in more depth.
2017
- (Investopedia, 2017) ⇒ http://www.investopedia.com/terms/c/commodity-market.asp
- QUOTE: A commodity market is a physical or virtual marketplace for buying, selling and trading raw or primary products, and there are currently about 50 major commodity markets worldwide that facilitate investment trade in approximately 100 primary commodities. Commodities are split into two types: hard and soft commodities. Hard commodities are typically natural resources that must be mined or extracted (such as gold, rubber and oil), whereas soft commodities are agricultural products or livestock (such as corn, wheat, coffee, sugar, soybeans and pork).
There are numerous ways to invest in commodities. An investor can purchase stock in corporations whose business relies on commodities prices, or purchase mutual funds, index funds or exchange-traded funds (ETFs) that have a focus on commodities-related companies. The most direct way of investing in commodities is by buying into a futures contract. A futures contract obligates the holder to buy or sell a commodity at a predetermined price on a delivery date in the future.
The major exchanges in the United States, which trade commodities, are domiciled in Chicago and New York with several exchanges in other locations within the country.
- QUOTE: A commodity market is a physical or virtual marketplace for buying, selling and trading raw or primary products, and there are currently about 50 major commodity markets worldwide that facilitate investment trade in approximately 100 primary commodities. Commodities are split into two types: hard and soft commodities. Hard commodities are typically natural resources that must be mined or extracted (such as gold, rubber and oil), whereas soft commodities are agricultural products or livestock (such as corn, wheat, coffee, sugar, soybeans and pork).