What Are Commodities in the Stock Market?

When people talk about the stock market, most think about stocks and bonds. But there’s another major piece of the financial system that often gets overlooked: commodities.

Understanding commodities helps you better understand inflation, economic cycles, and even why stocks move the way they do.

What Are Commodities?

In the stock market, commodities are raw, physical goods that are used to produce other products or power the economy. They are generally interchangeable, meaning one unit is essentially the same as another regardless of who produces it.

Unlike stocks, you’re not buying ownership in a company. You’re trading the actual resource.

In simple terms:
Stocks are companies.
Bonds are loans.
Commodities are the stuff the world runs on.

Main Categories of Commodities

Energy
Energy commodities fuel economies and industries.

Crude oil (WTI, Brent)
Natural gas
Gasoline

Oil prices, in particular, can influence inflation, transportation costs, and even consumer spending.

Metals
Metals are split into two groups:

Precious metals: gold, silver, platinum
Industrial metals: copper, aluminum, nickel

Gold is often viewed as a store of value, while copper is closely watched as a signal of economic strength or weakness.

Agricultural Products
These are essential food and livestock resources.

Corn, wheat, soybeans
Coffee, sugar, cocoa
Cattle and hogs

Weather, supply disruptions, and global demand all heavily impact agricultural prices.

How Commodities Are Traded

Most commodities are traded through futures contracts, which are agreements to buy or sell a commodity at a set price on a future date.

For everyday investors and traders, exposure usually comes through:

ETFs like GLD (gold), SLV (silver), USO (oil)
Commodity-related stocks, such as oil producers, mining companies, or agricultural firms

These provide easier access without handling futures directly.

Why Commodities Matter to Traders

Inflation Hedge
Commodities often rise when inflation increases, since they represent real-world costs like energy and food.

Economic Signals
Rising oil and copper prices can indicate economic growth. Falling prices may signal slowing demand or recession risk.

Diversification
Commodities don’t always move in the same direction as stocks, making them useful for balancing portfolios.

Commodities and the Broader Market

Commodity prices can influence interest rates, currency strength, and stock market performance. For example:

Higher oil prices can pressure consumer spending
Rising commodity costs can squeeze company margins
Falling commodity demand may signal economic slowdown

This is why professional traders and institutions keep a close eye on them.

Final Thoughts

Commodities aren’t just for professionals or hedge funds. They are a critical part of how the global economy functions and often provide early clues about what’s coming next in the market.

If you want to understand inflation, market cycles, and macro trends, you can’t ignore commodities.

They are the raw materials behind everything else.