Markets
Commodities
Metals, energy and agricultural commodities on MCX and NCDEX.
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About the commodity market
The commodity market is where commodities are bought and sold. They fall into three broad groups: metals such as gold, silver and copper; energy such as crude oil and natural gas; and agricultural produce such as wheat and pulses.
In India, commodities are traded as futures contracts on exchanges such as MCX and NCDEX, through a broker. A futures contract is an agreement to buy or sell a set quantity of a commodity on a future date. Commodity futures trading was re-introduced in India in 2003.
Why people trade commodities
- Diversification: commodity prices often move differently from shares and bonds.
- Inflation: precious metals such as gold have historically held value during inflation, though prices can fall.
- Hedging: producers and users of commodities can protect themselves against price changes.
- Liquidity: actively traded contracts can be bought and sold easily.
Commodity prices can be very volatile, and futures are traded on margin, so losses can exceed the margin paid.
Investments in securities markets are subject to market risks. Read all related documents carefully before investing.