Commodity indexes

Commodity Indices

Indices that track the price of different types of commodities. A commodity index may track commodities directly, or indirectly by tracking futures contracts for certain commodities. For example, commodity indices may track energy products or currencies, or may tracks futures contracts in either of those. Commodity indices operate much like exchange-traded funds or mutual funds in day-to-day trading: investors may buy, sell, or short sell shares in commodity indices as if they were stocks. An advantage to trading commodity indices is that it gives investors access to commodity markets without needing to buy or accept delivery on the underlying commodities.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Commodity indexes.

A commodity index tracks the performance of specific bulk goods or raw materials. Commodity indexes may measure the price of a physical basket of commodities, but many indexes are based on the prices of futures contracts currently trading on an organized commodity market.

The value of a commodity index fluctuates based on the performance of its underlying products or instruments, such as agricultural products, precious metals or currencies. Different indexes have various ways of categorizing commodities, and some indexes are weighted so that the most valuable materials have the greatest impact.

Individual and institutional investors can purchase shares in commodity funds that seek to replicate the performance of specific commodity indexes, just as they can purchase index funds and ETFs that track securities indexes.

A primary attraction of commodity funds is that they enable investors to enter the commodities market without directly purchasing physical commodities or futures contracts.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
This update will not affect Final Demand-Intermediate Demand or Commodity indexes from the PPI.
Commodity indexes declined in February as several positive news developments failed to boost commodity demand growth.
Amid the drama of Iran, the meltdown of refiner Petroplus and a wave of upbeat economic data, it was all too easy to overlook one of the most important short-term factors shaping oil markets: the reweighting of the world's biggest commodity indexes.
Dow Jones-AIG Commodity Indexes have been renamed Dow Jones-UBS Commodity Indexes.
Our clients now have a wide variety of choices in accessing commodity indexes."
Others have suggested that the price increases resulted from speculation in the futures contracts by hedge funds and investors in commodity indexes. Like stock indexes, commodity indexes track the composite price of a basket of long futures positions in physical commodities.
Investors who rushed into oil through commodity indexes this year - chasing big returns as other asset classes tanked - could face steep losses if prices fall from record highs.
The returns of commodity indexes come from three major sources: spot returns, rebalancing returns and interest yield on collateral.
Indeed, the concern over commodities has grown to the point where even two previously obscure commodity indexes - the National Association of Purchasing Managers price index (NAPM) and the Federal Reserve Bank of Philadelphia's prices paid index (PHIL) - have begun to capture considerable attention among economists and market analysts.
The investor presence in futures markets is most obvious in the S&P GSCI, the biggest of the commodity indexes. It still has a dominant weighting in US energy futures but has increased its exposure to Brent and another European marker, gasoil.
straightforward way for these investors to access raw materials, ranging from base metals to oil, is through commodity indexes, led by Goldman Sachs Commodity Index and the Dow Jones-AIG Commodity Index.

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