Commodities are the raw materials used to generate energy and produce the products and infrastructure that shape our everyday lives. They include precious and semi-precious metals like gold, silver, copper and nickel, as well as fossil fuels like oil and natural gas, building materials and agricultural products like wheat, cotton, pork and cocoa.

Commodities trading began as a means for producers to hedge against adverse movements in the price of their output, but it is now a largely speculative endeavour with individual and institutional investors taking a position on whether the price of a particular commodity will rise or fall. 

As an intrinsic part of our economies, almost anything can have an impact on commodities prices. For example, if weather patterns result in a poor harvest, reducing the supply of soft commodities like wheat and soy beans relative to demand, then prices might increase. Likewise if geopolitical tensions result in supply chain constraints or a major oil producing country deciding to restrict its output. Or if a particular industry experiences a surge in demand for its products, it will need more raw materials potential driving up the price of the underlying commodities. And if there is general uncertainty about economy, investors who are worried about the value of their investments may move money into gold, a traditional safe haven that tends to hold its value, increasing demand and price. 

Metals

Energies

Soft

Hard

A forward contract is a financial arrangement where two parties agree to execute a transaction involving the purchase or sale of a specific asset at a predetermined date and price in the future. This contractual agreement is tailored to the participants' needs, allowing for flexibility in terms of the underlying asset, quantity, and settlement terms.

The absence of a centralised exchange makes forwards incredibly versatile, unlike standardised futures contracts traded on exchanges, forwards are typically negotiated directly between the parties.

Forwards: Traded over-the-counter (OTC), directly between the two parties involved in the contract. These contracts are customizable and are privately negotiated between two parties. The terms, such as the quantity, price, and delivery date, are agreed upon individually.

Futures: Traded on organized exchanges, such as the Chicago Mercantile Exchange (CME) or Eurex. Futures contracts are standardized and traded on organized exchanges. The terms of the contract, including the size of the contract and the delivery date, are predetermined by the exchange.