The term "commodity" refers to raw materials. A commodity is a physical substance. Commodities include:

• agricultural products
• precious metals
• oil
• chemicals

When an investor speaks in terms of commodities, he or she is referring to anything that is typically traded on a commodities exchange. Commodities may also include currencies, the raw material of trade.

What Determines The Price Of A Commodity?

The price of a commodity is determined by supply and demand. In other words, when a commodity is plentiful, its price will be lower. Conversely, when a commodity is scarce and the demand for it is high, the price will be high.

How Do Investors Profit By Investing In Commodities?

As indicated above, the price of commodities depends on supply and demand. In the commodities trade, investors pay close attention to supply and demand and the effect of both factors on daily prices. Commodities investors seek to make a profit by speculating as to the price of commodities and basing their investment decisions upon their speculations.

Who Regulates The Commodities Market?

The commodities market is regulated by the Commodities Futures Trading Commission (CFTC). The CFTC is a federal agency with broad powers of regulation, enforcement, and investigation.

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