Commodity markets are venues where raw or primary products, known as commodities, are traded. These markets facilitate the buying and selling of various physical goods, including agricultural products (like wheat and corn), energy resources (such as oil and natural gas), and metals (such as gold and silver). Commodity markets can operate through exchanges or over-the-counter (OTC) transactions.
In these markets, commodities are typically classified into two categories: hard commodities, which are natural resources that are mined or extracted (like oil and gold), and soft commodities, which are agricultural products or livestock (like coffee, sugar, and hogs). Pricing in commodity markets is influenced by supply and demand dynamics, geopolitical events, weather patterns, and economic indicators.
Traders in commodity markets include hedgers, who use commodities to manage price risk, and speculators, who seek to profit from price fluctuations. The trading of commodities can involve physical delivery or be settled through cash transactions.
Overall, commodity markets play a critical role in the global economy by providing a platform for price discovery, risk management, and the efficient allocation of resources.