Commodities are an important aspect of most people’s daily life. A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Traditional examples of commodities include grains, gold, beef, oil, and natural gas.
For investors, commodities can be an important way to diversify their portfolio beyond traditional securities. Because the prices of commodities tend to move in opposition to stocks, some investors also rely on commodities during periods of market volatility.
Generally, commodities are extracted, grown, produced, and traded in large enough quantities to support liquid and efficient markets. These markets provide a transparent way for commodity producers, consumers, and financial traders to transact business.