A commodity is a basic raw material or good that can be traded and is largely uniform across producers. These goods are interchangeable, meaning one unit is essentially the same as another, and they are often used as essential inputs in the production of other products or services.

Historically, commodities such as precious metals, agricultural products, and oil & gas are seen as hedges against inflation. However, their performance is often more closely tied to the strength of the U.S. dollar in global markets rather than just domestic inflation trends.

Commodities are traded in two main ways: spot markets and derivatives markets. In spot markets, buyers and sellers exchange cash for immediate delivery of the product. In derivatives markets, contracts allow participants to buy or sell the commodity at a future date. Many traders close or roll over their contracts before delivery, focusing on price speculation rather than physical ownership.

The automotive industry is among the largest consumers of raw materials. Common resources include steel made from iron ore, aluminum, and glass. In addition, petroleum-based products are used to produce plastics, rubber, and specialized fibers essential for modern vehicles.