Understanding Commodity Trading
Commodity trading involves the exchange of primary goods, either in physical form or through derivative contracts. These commodities are broadly categorized into:
- Hard Commodities: Natural resources such as gold, silver, crude oil, and metals.
- Soft Commodities: Agricultural products like wheat, rice, cotton, and spices.
Trading occurs in two primary markets:
- Spot Market: Immediate purchase and delivery of commodities.
- Futures Market: Contracts to buy or sell commodities at predetermined prices on future dates.