What Is A Commodity In Financial Trading?

What Is A Commodity In Financial Trading?

Commodities are some of the most actively traded assets in the global markets. Every day, retail and institutional investors buy and sell commodities futures contracts to generate profits and enhance liquidity on the market. 

But what are commodities exactly and what types of commodities are available for trading around the world?

Commodities are raw materials or primary agricultural products that can be bought and sold. They are typically standardized and interchangeable with other goods of the same type. Commodities are essential in various industries, and they are often traded on commodity exchanges. These materials are strategically very important for national economies and trade agreements and disputes arise time after time due to the scarcity or issues associated with producing these commodities. 

Commodities are essential cogs of the global economy that figuratively and literally fuel the systems of international trade. 

If you are interested in investing in commodities and would like to know more about what types of commodities you can trade, this Investfox guide is for you. 

Types Of Commodities

Commodities range from oil and gas and other energy resources to agricultural products, such as corn, wheat, coffee, sugar, cotton, etc. 

Broadly speaking, commodities are anything and everything that can be grown, mined, or obtained in other ways from sources derived from natural resources. 

Crude Oil

Crude oil is one of the most widely traded commodities. It is a fossil fuel that is refined to produce gasoline, diesel, jet fuel, and various petrochemical products. The two primary types are Brent crude and West Texas Intermediate (WTI) crude. 

Oil is one of the most geopolitically strategic commodities in the world and the global market for crude oil is larger than the market capitalization of Microsoft and Amazon.com. The global crude oil market is estimated to be over $2.1 trillion as of 2023. 

crude oil.png

Natural Gas

Natural gas is a fossil fuel primarily used for heating and electricity generation. It is traded as both a physical commodity and a financial instrument. Despite international efforts to phase out the use of natural gas for heating and energy generation, the global gas market is estimated to be over $1 trillion. 


Gold is a precious metal valued for its rarity and attractiveness. It is used for jewelry, as a store of value, and in industrial applications. Gold is often seen as a safe-haven asset and a hedge against inflation. 

Investing in gold is one of the most popular strategies for investors during uncertainties on the stock and bond markets. 

As of 2023, the global gold market is estimated to be worth $196 billion. 

gold price.png


Like gold, silver is a precious metal. It is used in jewelry, electronics, and photography. Silver prices are influenced by both industrial demand and its role as a store of value.

Silver is the secondary safe-haven metal used by households to invest in during periods of high inflation. 

As of 2023, the global silver market is estimated to be worth $20 billion.


Copper is an industrial metal widely used in electrical wiring, plumbing, and construction. It is often considered a barometer for economic health because of its importance in various industries. 

Copper is one of the most widely available and widely mined metals in the world. As of 2023, the global copper market is estimated to equal $183 billion. 


Wheat is a staple grain used in various food products, including bread, pasta, and cereals. It is a key agricultural commodity and is traded in various forms, including wheat futures contracts.

As of 2023, the global wheat market is estimated to equal $48 billion. 


Corn is another important grain commodity used in food production, livestock feed, and ethanol production. It is a staple crop in many countries and is traded on commodity exchanges. 

The global market for corn is estimated to equal $75 billion as of 2023. 


Soybeans are a major agricultural commodity used in the production of soybean oil, animal feed, and various food products. They are also a key component in the global supply chain for protein.

The global soybean market is estimated to equal $185 billion as of 2023. 


Cocoa is the primary ingredient in chocolate production. It is sourced primarily from West Africa and traded as cocoa futures contracts.

The global cocoa market is estimated to equal $12.5 billion as of 2023. 


Timber is an essential component of the global construction and manufacturing industries. However, the price of timber broadly depends on the material sources and logistics, which can vary greatly from country to country. 

The global timber market is estimated to equal $233 billion as of 2023. 

Other Notable Commodities

There are also a number of other commodities that play a crucial role in the global economy. Here are some notable examples of strategic commodities consumed by national economies around the world:

  • Cotton - Cotton is a widely traded agricultural commodity used in the textile industry. It is a key component in the production of clothing and various fabrics
  • Uranium - Uranium is an essential part of the global nuclear energy supply chain and an essential fuel for the industry. However, the trade of uranium is strictly regulated and primarily done between government and international nuclear agencies 
  • Aluminum - Aluminum is a lightweight and corrosion-resistant metal used in various industries, including aerospace, automotive, and construction. It's a significant industrial commodity
  • Sugar - Sugar is an agricultural commodity produced from sugar cane and sugar beets. It is used in food and beverage production and is traded on commodity exchanges
  • Natural rubber - Natural rubber is derived from the latex of rubber trees and is used in the manufacturing of tires, footwear, and various industrial products. Its price can be affected by weather conditions and disease affecting rubber trees

Key Takeaways From What Is A Commodity In Financial Trading

  • Commodities are financial products that include materials derived from natural resources, such as oil, natural gas, gold, wheat, corn, etc
  • The global commodities market is a multi-trillion dollar industry that attracts billions of dollars of invested capital every day 
  • Futures contracts are the primary methods of exchange for commodities, which allow market participants to trade or hold these contracts until expiration 

FAQs On What Is A Commodity In Financial Trading

What are the types of commodities you can trade?

The commodities that are most frequently traded in the global markets are oil and gas, gold, silver, wheat, corn, copper, etc. 

In general, the types of commodities range from agricultural produce to energy resources and metals. 

What is the most traded commodity in the world?

The most traded commodity in the world is oil, which is part of an over $2 trillion dollar global market. Natural gas is the second largest commodity market at over $1 trillion dollars. 

How are commodities traded?

Commodities are typically traded using futures contracts, which allow traders to gain exposure to the underlying asset and sell the contract before delivery and profit from price changes, or have the underlying asset delivered to them upon expiration.