LeoGlossary: Commodity

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A good that is used in commerce and is interchangeable with other goods. Usually this is thought of as raw materials such as lumber, copper, or iron. It can also apply to agriculture with wheat, oranges, and corn.

Commodities are often traded on exchanges, with the Chicago Mercantile Exchange (CME) being the most popular.

Since commodities are often in raw material form, they are usually sold to businesses that manufacture or package the products. Those are what get sold to the end user.

They get broken down into two categories:

  • Hard - energy and metals
  • Soft - agriculture

General thinking is that owning commodities is a hedge against inflation.


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