A market that does business with all kinds of products are referred to as commodity markets. In the early stages to avoid goods market was only for agricultural products, especially effects on the local market. But when the decisive factors such as industrialization, globalization, technological progress, barriers and across the border, nearly an increased demand and strong competition from other players is paved way for commodity markets.
basically it's commodity markets to trade in commodities such as gold, cotton, oil, etc. Many terms that are both perishable non-perishable finished goods, raw materials and intermediate goods on the market traded internationally. Commodity market is not even necessarily for the purchase or sale of goods, but you can share it.
Commodity market operates on specified principles that should the trade be made only for standard products, says. Second, the transaction is done through a futures contract. Accordingly, the contract says, the goods are sold or purchased at a later date. However, the price at which they are sold the price, during the mission are agreed. Likewise, product marketing, uses a different type of contract known as a spot contract. In this agreement the goods when the contract was transferred. But it is also argued that the purpose of an exercise in future cash transaction at the time. Some of the commodities market, commodity investing food market, commodities market in oil and commodity fund investments.
Investing in commodities
On the first, was widely Commodity investments experienced by only a few sectors. It was originally limited to trade and exchange of goods and then it was for the regular and daily use. However, the confidence invested by the action of the phases together all sectors in the variety of goods made and allowed many fast movements, the transfer and handling of goods and services.
The following are the benefits of investing in commodities market
Reduced risks
As an investor, the inclusion of risk factors are just as bad when it comes to investing in commodities. So the profits that the balance of other raw materials, capital losses by acquiring other financial instruments in your portfolio. The opportunities, risks are less, because product is involved in various investing primarily. But when the mean time, if the policy for a future date you take reasonable care and can also ensure that the probability of risks have been reduced or eliminated.
Helps to install Price
However, the completion of the commodities market easily by analyzing the performance of the bond and equity markets to be monitored. In most cases, lead product market if the others do not meet, and vice versa. It is possible to forecast the future in terms of prices and contracts, taking into account the ups and downs to make in other markets. The condition would be that the assets should be in the commodity market is not correlated with the stock and bond markets.