Commodity Market – Base Metals and the Agri Products

A market that conducts business with commodities of all nature are referred as Commodity

markets.At the Initial Stage Occurrence of Commodity market was meant only for agricultural products which was predominantly affecting the local market with imrovised free stocks.

But when the crucial factors such as Industrializations, Globalisation, technological advancements breaks barriers and came across the boundaries it virtually increases demand from consumers and intense competition from other players has paved way for commodity markets.

Commodity markets basically deals in the trade of commodities like gold, cotton, crude oil etc. Many items both perishable non perishable, finished goods, raw materials and semi finished goods are been traded in this market at the international level. Even Commodity market does not necessarily require you to buy or sell the commodities but you can even exchange them too.

Commodity market works on certain pre-determined principles which says that trading has to be done only for standard products. Secondly that transaction should takes place through a future contract. Accordingly, contract says that commodities will be sold or bought on a future date. However the price at which they are sold will be the price agreed during the contract. Similarly commodity marketing also makes use of another type of contract called spot contract. In this contract the goods are been transferred as soon as the contract is made. However it has also been argued that the purpose of a spot contract is to exercise a future contact in due course of time. Some of the commodities investing market are commodity food market, commodity petroleum market and commodity fund investing.

Investing in Commodities

At the Initial, Commodity investing was widely encountered merely by a few sectors. It was first restricted to the trade and exchange of commodities and then was meant for regular and day to day use. However the awareness by the occurrence of the stages has brought all sectors together into the manifold of commodity investing and numerously has enabled speedy movements, transfer and transaction of goods and services.

The following are the benefits of investing in commodities market-

Reduced Risks

As an investor, Involvement of risk factor risks are merely very less if it comes to invest in commodities. Therefore the gains which you acquire from commodity investing balance other losses due to other financial instruments in your portfolio. The chances of risks are less because commodity investing primarily deals with diverse items. However if at the mean time, if the contracts entered for a future date you can exercise reasonable care and can also see to it that the chances of risks are reduced or nil.

Helps to Fix Price Easily

However the accomplishment of commodity market can be easily monitored by analyzing the performance of bond and share market. In most of the cases ,Commodity market will perform well when the others don't perform and vice versa. It is therefore possible to give Future prediction regarding the prices and make the contracts by considering the ups and downs in other markets. A prior condition for that would be that the assets in the commodity market should not be correlated with the stock and bond market.

Commodity Market Base Metals and the Agri Products

By: shanu

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