A commodity market is basically a market that is known for trading in the economic sector instead of manufactured products. Soft commodities include agricultural products like coffee, fruit, sugar and wheat. Hard commodities are the ones that are mined, like oil and gold. Investors have access to nearly 50 commodity markets globally with purely economic transactions rapidly outnumbering various types of physical trades which include delivery of goods. The oldest manner of investing in such commodities is by future contracts. This article is about the history of commodity markets.
The history of commodity markets:
It is believed that commodity markets and commodity-based money originated in a crude form in Sumer in as early as 4500 BC. Sumerians were the first ones to use clay tokens as well as clay tablets for representing the amounts. For instance, the total number of goats for delivery was mentioned in a clay token and then sealed in a particular clay vessel. These promises of date and time of delivery basically resemble the future contracts.
Early civilizations used rare seashells, pigs or other animals and items in various ways in the form of commodity money. Since then, traders have found out several ways of simplifying and standardizing trade contracts.
Silver and gold markets evolved as people started becoming civilized. Initially, the valuable metals were valued for their shine and beauty and were associated with class and royalty. In time, people started using precious metals for trade by exchanging them for commodities and goods, or as payment for work. Gold, when measured out, become money. Gold’s unique density, scarcity and the fact that melting, measuring and shaping gold is easy made it a preferable trading asset.
Towards the end of the 10th century, the growth of commodity markets as the mechanism to allocate labour, goods, capital and land took place across Europe. In between the 11th and 13th century, regional specialization and English urbanization improved and expanded infrastructure. Scales were introduced in 1466 in Osdorp and Sloten villages for weighing butter and cheese.
The Amsterdam Stock Exchange, perhaps the pioneering stock exchange, originated as a commodity exchange market. The Amsterdam Bourse was created in 1530 as a platform for commodity exchange and again rebuilt in the year 1608. However, commodity exchanges at that time still existed only in a few cities.
Clearance and reputation became the major concerns and states capable of handling them ably emerged as the potential financial centers. This is the history of the commodity market online.
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