Editing Commodity market (section)

{{Short description|Physical or virtual transactions of buying and selling involving raw or primary commodities}}
{{Use dmy dates|date=August 2018}}
{{Financial markets}}
[[File:Chicago bot.jpg|thumb|right|250px|[[Chicago Board of Trade]] [[Maize#Commodity|Corn Futures]] market, 1993]]
[[File:A1 Houston Office Oil Traders on Monday.jpg|thumb|right|[[Price of oil#Speculative trading and crude oil futures|Oil traders]], New York City, 2009]]

A '''commodity market''' is a [[Market (economics)|market]] that trades in the [[Primary sector of the economy|primary economic sector]] rather than manufactured products.  The primary sector includes agricultural products, energy products, and metals. Soft commodities may be perishable and harvested, while hard [[commodities]] are usually mined, such as [[gold]] and [[Crude oil|oil]].<ref>{{cite web|url=http://www.investopedia.com/terms/s/softcommodity.asp#axzz2EGf9ZeC2 |title=Soft Commodity Definition |publisher=Investopedia |date=15 February 2009 |access-date=6 December 2012}}</ref> [[Futures contract]]s are the oldest way of investing in commodities.{{Citation needed|date=December 2020|reason=dubious, should clarify the affirmation}} Commodity markets can include physical trading and derivatives trading using [[spot price]]s, [[Forward contract|forwards]], [[futures contract|futures]], and [[option (finance)|options]] on futures.{{clarify|date=December 2020 |reason= "can include" Physical VS Paper}} Farmers have used a simple form of derivative trading in the commodities market for centuries for price risk management.<ref name=NFA2006>
{{cite web
|publisher=National Futures Association
|title=Opportunities and Risk: an Educational Guide to Trading Futures and Options on Futures
|url=http://www.nfa.futures.org/NFA-investor-information/publication-library/opportunity-and-risk-entire.pdf
|location=Chicago, Illinois
|year=2006
|page=6
}}</ref>

A [[Derivative (finance)|financial derivative]] is a financial instrument whose value is derived from a commodity termed an [[Underlying|underlier]].<ref name=washingtonpost21apr2010>
{{cite news
|url=https://www.washingtonpost.com/wp-dyn/content/article/2010/04/20/AR2010042004666.html
|newspaper=Washington Post
|title=A primer on financial derivatives
|date= 21 April 2010
|first=Robert
|last=O'Harrow
}}</ref> Derivatives are either [[Exchange-traded derivative contract|exchange-traded]] or [[Over-the-counter (finance)|over-the-counter]] (OTC). An increasing number of derivatives are traded via [[Clearing house (finance)|clearing houses]] some with [[central counterparty clearing]], which provide clearing and settlement services on a futures exchange, as well as off-exchange in the OTC market.<ref>{{cite web|url=http://chicagofed.org/webpages/publications/understanding_derivatives/index.cfm |title=Understanding Derivatives: Markets and Infrastructure - Federal Reserve Bank of Chicago |work=Chicagofed.org |access-date=23 August 2018}}</ref>

Derivatives such as futures contracts, [[Swap (finance)|Swaps]] (1970s–), and Exchange-traded Commodities (ETC) (2003–) have become the primary trading instruments in commodity markets. Futures are traded on regulated [[commodities exchange]]s. Over-the-counter (OTC) contracts are "privately negotiated bilateral contracts entered into between the contracting parties directly".<ref name=DerivativesCanada>
{{cite web
|url=http://www.expertpanel.ca/eng/reports/final-report/appendix5.html
|year=2007
|title=The Regulation of Derivatives in Canada
|publisher=Expert Panel
}}</ref><ref name=bloomberg18Jul2010>
{{cite news
|url=https://www.bloomberg.com/news/2010-07-19/commodity-manipulation-may-be-easier-to-prove-with-u-s-financial-overhaul.html
|title=Commodity Manipulation May Be Easier to Prove After Overhaul
|publisher=Bloomberg
|first=Asjylyn
|last=Loder
|date=18 July 2010
}}</ref>

[[Exchange-traded fund]]s (ETFs) began to feature commodities in 2003. Gold ETFs are based on "electronic gold" that does not entail the ownership of physical bullion, with its added costs of insurance and storage in repositories such as the [[London bullion market]]. According to the [[World Gold Council]], ETFs allow investors to be exposed to the gold market without the risk of price [[volatility (finance)|volatility]] associated with gold as a physical commodity.<ref name=GoldMutualVSETF>
{{cite news|author=Bytom Lauricella
|url=https://www.wsj.com/articles/SB10001424052748704107204574473662177737546
|title=Gold Mutual Funds Vs. Gold ETFs: It Depends on the Goal
|newspaper=Wall Street Journal
|date=2 November 2009
|access-date=3 October 2011}}</ref><ref name=commodityETF>{{cite web
|url=http://news.morningstar.com/articlenet/article.aspx?id=305219
|title=The Future of Commodity ETFs
|publisher=Morningstar
|date=25 August 2009
|access-date=3 October 2011
|archive-date=8 January 2017
|archive-url=https://web.archive.org/web/20170108235223/http://news.morningstar.com/articlenet/article.aspx?id=305219
|url-status=dead
}}</ref><ref group=notes>This article covers physical product (food, metals, energy) markets but not the ways that services, including those of governments, nor investment, nor debt, can be seen as a commodity. Articles on [[reinsurance market]]s, [[stock market]]s, [[bond market]]s, and [[currency market]]s cover those concerns separately and in more depth.</ref>

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