Commodity market proved that affect the world through the generations. Some point out that the rice contracts were traded in China by up to 6000 years. The acute shortage of basic commodities has led to world wars and the surplus in certain sources has led to devastating effects on the economies of the countries as well.
While the average person in Western civilization will suffer from higher oil prices when it fills fuel, states, and especially in the Middle East, will collapse under the substantial reduction in world oil prices. If we on oil as an example, it is interesting that oil prices are subject to intensive monitoring by the consumer, companies and countries, and all of them the same degree of importance.
To classify commodity markets, you will find four main groups of sources:
Energy: Heating oil, crude oil, fuel and natural gas.
METALS: Silver and gold, platinum and copper.
Livestock and meat: lean pigs, pork, live cattle and feeder cattle.
Agricultural materials: corn, soybeans, cocoa, coffee and cotton sugar.
In the past, civilizations are trading off of commodities, including sea shells and spices and gold and many others. In a while, that these days, the product and the date of delivery and the quality of the roads was unexpected in traditional Swedish cuisine, the majority of the old economies were based on the commodities market. Girl power empires on their ability to accommodate complex trading systems and to facilitate the circulation of goods.
Commodity market differs in many respects from traditional purchases of stocks and bonds. First of all, there must be an agreed criteria before conducting the operation in the commodities market. For example, if you sell a large quantity of corn, the buyers to be satisfied that the corn has the quality required when receiving the product level.
In addition, the value of the goods affected by a wide variety of components, for example, worldwide improvements in the political aspects, financial and other, in addition to the extreme weather conditions and climatic disasters.
Basic principles underlying commodity market and preliminary. It all depends on supply and demand, which is the basis of the process. However, the commodities market is known to be a little bit difficult. It is clear that no one knows what will happen tomorrow on the price of gold or oil, but experts want to believe that they have some basic indicators on what to expect. This was not the situation in many cases, especially with regard to oil prices, especially in the period between 2008 and 2009. The volatility in the commodities market in these years was unprecedented and unexplained by experts. I used to expect such sharp movements that appear during periods of war, such as the Gulf wars or perhaps during the Iranian revolution, but while these events have affected the oil prices, but they did not have the same devastating effect that we have seen over the past two years, and can not one can explain why.
Goods market can summarize in two words "hedge" and "futures foundations." Global economies rely on the commodities market to live. Let's take the airline, for example. It will stand the airline without permanent refueling at minimum risk to fluctuations in price. In case all the airline company to deal with the risk of sharp increases in prices, will not hold any of them. And so they use a range of trading instruments and futures contracts to protect themselves through the use of hedge technique.
In conclusion, as is the case in the Forex and many other markets, it can become a commodity market is very similar to gambling, and can lead to devastating losses. But in the event of a trader to teach himself and understand what drives the commodities market, and the ways to hedge and futures, the traders and investors, companies and countries can benefit from the safety net that will protect them from volatile markets and volatile commodity market prices.