Commodities are the most basic and reliable goods to base your trading on. The practice of exchanging commodities is so check this old that it may, in fact, be the very first form of trading. A commodity could denote any physical item which humans value. Commodities will remain a crucial part of trade as long as there are humans. This could be perishable items like wheat, meat, and animals. Items for energy like coal, oil, natural gas or other fuels could be included. Gold and silver are examples of items that have less obvious uses.
The History of Commodity Trading
There is obviously quite a disconnect between how commodity trading may have functioned thousands of years ago, and how they function today. This is why we will shortly go over the history of commodity starting in the ancient era.
Trading in commodity trading originally referred to the trading of commodities of equal values without intermediaries (i.e. money). money). It could have been grains for gold or anything else people thought of. Monetary exchanges would have started over 6000 years ago, around 4000 BCE. In the ancient world (Mesopotamia, Egypt), people would have traded these items directly. Monetary exchange systems began to develop soon after. In Sumer, for example, townsfolk would exchange clay tokens in exchange for, say, livestock. They developed writing systems in tandem to keep track of their transactions. You could usually see engravings of these information on clay tablets. You could equate these clay tablets with something like the earliest contracts.
As time went on, people began to value other commodities. Gold and silver are two of the most popular commodities because of their visual appeal. They began to dress themselves in them as a way to show off their status. They could be shaped into any shape and their volume was easily adjustable. These items, which were highly valued but had little practical use, slowly found other applications. These items were used as a currency, an intermediary for exchange.
As time went on, people still exchanged commodities for other commodities, services, or land. They would try to estimate the value of commodities by weighing them. Gold and silver were used as alternatives to these traditional commodities.
Modern Trading
By 1530, we approach something close to modern trading, with the founding of the Amsterdam Stock Exchange. The people would have used what we call rudimentary contract for trading goods. This includes forward contracts, options, and short sales. This sort of institution became quite popular and spread all over Europe and subsequently to the United States. From there it continued to develop into the 19th and 20th centuries.