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About Commodities and Their Classes

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About Commodities

So You Want to Know More About Commodities

It is natural, given the economic events of the last decade, to be suddenly more enthused about commodities. Along with oil and gold, they have gained a place in the daily financial headlines that they never really held before. Much of this is due to a growing and more prosperous world population. Much of this is also due to the global instability that has accompanied this growth.

When you think about commodities, you can divide them into three classes or categories. The first class is hard commodities. These are things that are taken from the ground through mining processes. Examples include iron, silver, salt and gold. As you can see, a sub-category here would be precious metals.

The second category is soft commodities. These are generally things that grow in the ground. This class includes most crops. Think of coffee beans, wheat and apples. The names of these commodities may not seem as impressive as those of hard commodities. The thing about commodities such as these, though, is that they are even more necessary. Everyone has to eat. This imperative demand supports prices.

Finally, the third category involves energy products. These can include otherwise hard commodities such as coal but also takes into account oil and natural gas. Electricity itself is a unique commodity in this category. It cannot be stored for very long and usually has to be consumed immediately by its purchaser.

What Else Should I Know About Commodities?

Supply and demand for commodities fluctuates significantly. You have to watch these factors closely if you want to make profits from your investments. Knowing how to read future demands and to predict supply problems are the most important skills to acquire after you learn about commodities.

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