Commodity Market
Commodities work basically like credit or contracts. Buy now and pay later is also a way of looking at it. Commodities are raw products that are in demand and that do not differentiate in quality. Gold is gold and wheat is wheat. Standardized contracts are used to trade these commodities or everyday products.
The Commodities Futures Trading Commission regulates the trade of commodities in the United States. The CFTC regulates the trading because at one time, the majority of trading took place in agriculture.
Today, they evaluate the competitiveness and efficiency of the trades and also protect against fraud, oversight, and abuse. The price of commodities can change on a daily or weekly basis. The buyer of the contract makes money if the price goes up. That buyer will receive the product at the lower price originally agreed upon, but can turn around and sell it for the price it is going for at the time being.
You will also hear commodities referred to as commodities futures, or futures contracts. Commodities are agreed to be traded or delivered at a certain date in the future, for the exchange of currency. A contract is used because the trader himself cannot actually deliver the goods. The contract is agreed upon, the goods are transferred or delivered, and then the contract is satisfied.
There are many arguments as to what exactly constitutes a commodity and if it is tradable. While things like electricity, metal, and agriculture are commodities, there have been recent arguments as to whether emissions, weather, and community is considered a commodity.