A commodity is a raw material that can be bought and sold, such as copper or coffee. Examples of widely traded commodities are gold, silver, crude oil, natural gas, coffee, wheat and corn.
Commodities are crucial to our everyday lives which partly explains why investors see the value in trading them. They are often bought and sold on exchanges via futures contracts which are basically agreements to buy or sell a certain amount of a good at some point in the future.
The prices set in commodity futures contracts are based on speculation. If the contract expires and the commodity is selling at a lower price than what was agreed upon in the contract, the buyer profits. However, if the price of the commodity rises, the buyer loses out on some money.