What Are Commodities?

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Commodities are products that cannot be differentiated from another product of that type. Products like gold, wheat, precious metals, aluminum, copper, and other food products. They are simply what they are. If it cannot be distinguished from another product of the same type, it is a commodity.

Changes in commodity prices can tell us a few different things. For instance, if the price is rising rapidly then it’s likely that demand is increasing rapidly, too. When corn was taken to produce ethanol, it increased the demand and drove up the prices of corn leaving a lot of people unable to buy food products.

There is another cause of price increases that doesn’t have to do with demand for food. There are parties that hedge against the US dollar by purchasing commodities that will have demand no matter the way that the economy goes. So countries are hoarding products and driving the prices up as well as causing inflation.

Commodity prices and the way people purchase them fall under commodities law. Different private companies and governing parties will try to manipulate the commodities to their advantage. For more information on commodities and the way commodity price is affected, check out the video above.

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