INTRODUCTIONA commodity can be defined broadly as "a physical product, natural resource, or chemical substance that an individual can touch, taste, smell, extract, grow, consume, or deliver" ( Lind Waldock, 2011 ). Raw materials are fungible, meaning they are considered equivalent even though they may come from different producers. Because there is little product differentiation, commodity prices are fundamentally driven by global supply and demand (S&P, 2011).A. MAIN CATEGORIES OF COMMODITIES Commodities are tangible physical products that can be divided into three main categories: industrial and precious metals, agricultural products and energy. Industrial and Precious Metals Metals are classified as industrial metals or precious metals. Industrial metals include base and ferrous metals such as aluminum, copper, nickel, zinc, iron, steel, lead, titanium, cobalt, tin, etc. These physical goods are generally used as production inputs. Precious metals are those that are rare and have high economic value. Precious metals include gold, silver, platinum, palladium, etc. Although precious metals can also be used industrially, they are generally considered to have intrinsic value. The highest value is determined by many factors including rarity, uses in industrial processes and as an investment commodity. Investing in metals can be made by purchasing the physical asset itself or through futures contracts. Another way to trade metals is to invest in companies that explore or produce these metals, such as miners. As the economic environment continues to be uncertain, investors tend to place their funds in precious metals because they have an inverse relationship with currency strength and act as a hedge against inflation. July 18, 2011, from www.spindexes.com/assets/files/commoditiesSecurities Industry and Financial Markets Association. 2005-2010. “What You Should Know: Risks of Investing in Bonds.” Retrieved July 16, 2011, from http://www.investinginbonds.com/learnmore.asp?catid=3&id=383Superior Investor. “How to Trade Commodity Futures.” Retrieved July 12, 2011, from http://www.superiorinvestor.net/trading-options/commodity-futures.htmlSun, Leo. January 24, 2011. “Southwest Airlines (LUV) Profits Soar, Fuel Prices Loom Larger” Retrieved July 16 from http://www.investorguide.com/article/7628/southwest-airlines-luv-profit -soars- fuel prices loom large/Wiley Publishing, Inc. 2011. “Understanding the Real Risks Behind Commodities, for Dummies.” Retrieved July 16, 2011, from http://www.dummies.com/how-to/content/understanding-the-real-risks-behind-commodities.html