What are Commodities?

A commodity is a raw good used in business. Each commodity, when traded on an exchange, must meet standards and grades. They may each be slightly different, however, ultimately are the same amongst all producers. There are two different kinds of commodities, soft and hard: Soft commodities – This refers to items that are grown as opposed to mined. For example, agricultural products such as , , , and more. Produced by farmers, these instruments are highly sensitive to climate and weather changes, and have cyclical price patterns dictated by seasons. Hard commodities – This refers to items that are mined, such as , other , diamonds and oil, along with other . Commodity Prices Various factors can affect the prices of commodities and contribute to their fluctuation significantly. Supply and Demand – If supply and demand balance out, prices should stay the same. However, any time the market thinks the supply will be lower due to weather or production cuts, prices tend to go higher, and vice versa; higher supplies tent to lead to lower prices. Stock and Inventories – Production of these commodity prices can be affected by the following; weather, crop diseases, production issues with staff, political and economic environments which form additional charges such as taxes, trade laws, subsides from governments etc. Currency Strength – Connections between some of the worlds most traded commodities and pairs are common. For example, the Canadian dollar (CAD) is connected to prices since Canada is a large exporter of oil. If you are aware of these common connections, then monitoring them and trading at the right time are important to making the right decisions in trading. It should be noted that most commodities are priced in US dollars, and thus it would be wise to monitor the in order to better forecast the price dynamics. We allow from the same trading platform, so you can . Inflation – When there is inflation, the price of a commodity usually changes accordingly.