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Raw commodities are bought, sold or traded in a commodity market. Hard commodities are natural resources that are mined or extracted, such as gold and oil. Soft commodities are agricultural products, such as wheat or livestock.

There are currently 50 physical and virtual commodity markets worldwide where almost 100 primary commodities trade through the exchange of ownership rights -- the actual commodities don’t change hands. A commodity market can create a large economic impact by influencing the prices companies pay for certain raw materials.

An uninformed investor who trades in a commodity market is essentially gambling or speculating. But buying into a commodity futures contract enables investors and companies to lock in quantity, price and delivery date, therefore minimizing volatility and helping them to plan business endeavors.

Futures contracts provide the most direct way to invest in a commodity market. Investors also buy stock from corporations whose businesses rely on commodity prices. Or they buy mutual funds, ETFs and index funds that focus on commodities-related companies.

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