How commodity prices work
Commodities are raw materials bought and sold in fixed amounts. That covers precious metals such as gold and silver, energy products like crude oil and natural gas, and metals such as copper or aluminium used in industry. You’ll see their prices set both on global exchanges and by traders in wholesale markets. They’re quoted in units that can take some getting used to: troy ounces for precious metals, barrels for oil, MMBtu for natural gas, or metric tonnes for base metals.
This section explains how those prices are determined, plus the difference between a spot price (what you’d pay for immediate delivery) and a futures price (agreed for delivery later). And there’s a bit about why the dealer’s price is always higher than the number you see on the screen. You’ll come across terms like premium, spread, contango and allocated storage here, too. Each has a specific meaning, so it’s worth knowing how they affect what you pay.
Buying, storing and the risks
When you look at precious metals, you’ll find information on buying bars or coins, purity ratings and fineness marks, using vaults for storage, arranging insurance, and how to sell them back to a dealer if you decide to. With energy and industrial metals, most people don’t take physical delivery; instead, they’ll reach them through investment funds or by trading futures. We outline how those financial products operate, as well as the less obvious costs and the real risks involved.
Commodity prices shift with supply, demand, currency changes and political events, so what you hold can lose value as well as gain. The articles here are only for general information, not investment advice. If you want to see market prices in real time, visit our commodity price pages.