Commodity

Commodities are raw materials before processing — crude oil, gold, copper, wheat, coffee. Because quality is standardised, a unit trades at the same price regardless of where it came from.

Unlike shares or bonds, a commodity generates nothing on its own. Gold pays no dividend and oil accrues no interest. The entire return depends on selling it later at a higher price.

They are still held because they move differently from other assets. Commodity prices often rise with inflation, offsetting part of the damage to shares and bonds during inflationary periods.

Prices are usually driven by supply events: production cuts by oil states, a drought damaging harvests, a strike at a mine. These change prices abruptly, which is what makes commodities so hard to forecast.

Individuals usually gain exposure through related ETFs or shares in commodity producers. Note that products rolling futures contracts leak value at each roll, which can make them poor long-term holdings.