Commodity speculation

Commodity speculation may be undertaken through the buying, holding and reselling of physical commodities or through the buying and selling of commodity futures contracts - not the commodity itself. Speculators hope to make profits by anticipating price movements. If they expect the price of a commodity to go higher they buy futures contracts, which is known as taking the "long" position, whereas if they think the price will fall they will sell futures, or sell "short". Commodity markets are widely used also as a means of foreign exchange speculation for the reason that, in the case of commodities traded internationally, the effects of the exchange rate movement will be combined with the underlying shifts in the value of the commodity.