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Commodities

The allure of "hard assets"

Commodities are, to all intents and purposes, best described as "hard assets" and include base and precious metals like aluminum, copper, gold and silver. Foodstuffs like wheat, beef, corn and pork-bellies are also covered by the term as are energy products like natural gas and crude oil.

Commodities have enjoyed something of a bull market in recent years as demand from emerging economies like those in China, India and Brazil has increased in response to their infrastructure ambitions and the growing middle-classes within their populations.

The advantages of precious metals

Precious metals have traditionally been used both as currencies and as a store of wealth. Unlike paper money, they cannot be inflated by printing more. They cannot be devalued by government decree -- the free market dictates the price and, unlike paper currency (often called fiat) or investments in stocks and bonds, precious metals are assets which do not depend on a third party's ability or promise to pay.

Commodities can be bought and sold on dedicated exchanges and investors can gain exposure by investing in futures contracts and in exchange-traded funds that offer the added benefit of not having to take physical delivery of the commodity.