Commodities

Market

-by eduCBA

What do you mean by Commodities Market?

• It is a physical or a virtual place where buying, selling and trading raw or primary products takes place.

• Commodities market is same as equity market the only difference is that instead of buying or selling of shares, commodities are traded here.

• For investors' purposes there are currently about 50 major commodity markets worldwide that facilitate investment trade in nearly 100 primary commodities.

These commodities can be majorly classified into the following: •Precious Metals: Gold, Silver, Platinum, etc. •Other Metals: Nickel, Aluminum, Copper, etc. •Agro-Based Commodities: Wheat, Corn, Cotton, Oils, Oilseeds, etc. •Soft Commodities: Coffee, Cocoa, Sugar, etc. •Live-Stock: Live Cattle, Pork Bellies, etc. •Energy: Crude Oil, Natural Gas, Gasoline, etc.

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Different Segments In The Commodities Market

Over-The-Counter (OTC) Market Exchange-Traded market

Determinant factors of commodity prices

• Demand And Supply

• Weather conditions

• Economic and political conditions

Participants of commodity market:

Hedgers– Hedging in simple language means the reduction of risk. Consequently any investor who is looking at reducing his risk is known as Hedger.

Speculators – These are the investors who speculate on the direction of the futures prices for making profit. They hypothesize expected price movements and take positions accordingly.

Arbitrageurs– They are the traders who attempts to profit from, pricing inefficiencies in

the commodities market. Arbitrage in a way involves simultaneously sale and purchase of the same commodities in different markets.

• Chicago Board of Trading (CBOT) • New York Mercantile Exchange (NYMEX )

• London Metal Exchange (LME)

World’s Major Commodity Exchanges

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India’s Major Commodity Exchanges

• Multi Commodity Exchange (MCX) • National Commodity and Derivatives Exchange

(NCDEX) • National Multi-Commodity Exchange (NMCE) • Indian Commodity Exchange (ICEX) • The ACE Derivatives exchange ( ACE ) • The Universal commodity exchange (UCX)

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