How It Works Spot markets: Commodities are bought and sold for immediate delivery. Futures markets: Standardized contracts are traded for delivery at a future date, allowing producers and consumers to hedge against price changes. Derivatives: Options and swaps linked to commodity prices are also used for risk management or speculation.
Types of Commodities Energy: Crude oil, natural gas, coal. Metals: Gold, silver, copper, aluminum. Agriculture: Wheat, corn, coffee, cotton. Livestock: Cattle, hogs.
Role of Commodity Markets Price discovery: Markets determine prices based on supply and demand. Risk management: Producers and consumers hedge to protect against price volatility. Liquidity: Exchanges centralize trading, making it easier to buy and sell large volumes.
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