Why Commodities
Global Institutional investor interest in commodity trading has increased significantly over the past few years. This, in part, reflects powerful cyclical and structural forces working in favour of commodity markets, while, also the realisation of the need to diversify personal investments into upcoming and popular financial products.

But what are these commodities?

Commodities are goods that are typically used as inputs in the production of other goods and services. Commodity prices are determined largely by supply and demand interactions in the global marketplace. Supply and demand conditions may be influenced by factors like the weather, geo-political events, and supply-side shocks (e.g., wars, hurricanes).

Some examples of commonly traded commodities are energy products like oil and natural gas, metals like gold, copper and nickel, and agricultural products like sugar, coffee, and soybean.

Commodities exhibit interesting risk-return profile. Commodities not only offer a good way to diversify a portfolio of stocks and bonds, they often offer better returns. According to a Yale Study,

Since 1959, commodities futures have produced better annual returns than stocks returns and outperformed bond returns
    even more.
During the 1970s, commodities futures outperformed stocks; during the 1980s the exact opposite was true - evidence of the
    "negative correlation" between stocks and commodities that many of us have noticed.
The returns on commodities futures "positively correlate" with inflation. Higher commodity prices were leading a wave of high
    prices in general (i.e., inflation), and that's why commodity returns do better in inflationary times, while stocks and bonds perform
The returns on commodities futures were "triple" the returns on stocks in companies that produced the same commodities.

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