A commodity is something very basic that we all use in our daily lives. For example, oil, grains, juice, natural gas, precious metals etc. These commodities are trades on international exchanges and provide a very important way for investors and traders to diversify their portfolios away from the traditional avenues of equity, bonds and real estate. Traditionally, adding commodities exposure to your existing portfolio helps you increase the returns while lowering the risk.
Other markets such as Forex and stocks are also dependent on these commodities markets. For example, USDCAD and AUDUSD have correlations with OIL and similarly stocks of Gold mining companies are correlated to Gold prices.
Broadly there are major four categories for commodities i.e. Energy (e.g. Oil and natural gas etc.), Metals (e.g. Gold, copper, silver etc.), Livestock/Meat and Agriculture (e.g. wheat, rice, soya etc.)
At Vikinsa Capital Management we trade only Metals and Energy. Our trading portfolio contains at least one commodity position nearly at all times. We mostly trade Gold and USOIL with our highly sophisticated Fibonacci Core Strategy.