Commodities

Commodities are the natural resources that form the building blocks of the global economy. Soft commodities –called ‘softs’– are typically agricultural (like wheat and sugar), whereas hard commodities –called ‘hards’– are metals or energies (such as silver or gas).

Commodities are traded on a number of exchanges that specialise in particular markets, including LIFFE for agricultural products, London Metal Exchange for non-precious metals, Chicago Mercantile Exchange for energy and metals, and ICE Futures Exchange for energy.

The commodity markets are driven by many factors, including supply and demand, the weather, economic and political events, and the US dollar (because that’s the currency commodities are normally priced in). As a result of these factors, commodity prices can fluctuate significantly.