In order to understand the place of the commodity markets, one needs to consider the bigger picture. This is why, at first, attention is given to the asset class ‘commodities’. An asset class is a group of products, such as securities, or financial instruments, that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.
There are many asset classes but, from an investment point of view, there are five main groups. The first asset class in which investors place capital concerns equity (stocks, or company shares). The second asset class is formed by interest-linked products (e.g. bonds and long-term loans, such as mortgages). A third asset class is formed by currencies (e.g. US dollar, Japanese Yen, Swiss Franc or Russian Ruble). The fourth asset class concerns real estate, such as residential buildings and offices. The fifth asset class in this listing is formed by commodities.
Asset classes are certainly not limited to these five groups, but these are the most common categories. The setup is rather arbitrary or, at least, subjective. Wine or, for instance, art can also be seen as specific asset classes, like volatility (-related products) and many others.