What Commodity Markets Are All About?
In economics, a commodity is any item of personal or private use, which is purchased with the aim of earning a profit in anticipation of its eventual sale. In common usage, however, the term commodity is used to refer to any sort of article of personal use that is bought with the intention of reselling it as soon as possible. The term commodity can also refer to any process of bartering, such as the exchange of goods, services, or information. In economics, a commodity is generally a non-monetary good, normally a raw material, which has significant or complete fungibility: that is, that the marketplace regards cases of the good as equal or nearly equal to each other without regard to who produced them. This is why, for instance, the purchase of tangible goods is always treated as a transaction of sale or purchase with the aim of selling the product to a buyer.
Commodity exchanges are venues where contracts to buy or sell a specific commodity are established by buyers and sellers. Such exchanges can take many forms. In traditional futures contracts, a buyer and a seller generally decide on a price in advance and then enter into a contract to sell the underlying product at that price on or before a specified date in the future. These contracts, however, are less liquid because they do not settle instantly. Future contracts, on the other hand, settle instantly and are consequently the more common form of Commodity trading.
In order to participate in the futures market, it is necessary to have a commodity in definite quantity, usually based on what the investor thinks will be an attractive price in the future. To participate in the futures market effectively, it is advisable to have some experience in the field and to also possess a substantial amount of cash. Investors can participate in futures by either buying a futures contract or buying an underlying commodity. In order to buy a futures contract, an investor can open a margin account. If you want to participate in futures but don’t have any gold or silver, then you can also use your CD or a trust account.
