HOW COMMODITIES DIFFER FROM OTHER ASSETS: STORAGE, TRANSPORTATION/TRANSMISSION/SHIPPING, SPOILAGE
Some of the key differentiators between the commodities markets and other asset classes are the functions of storage, transport and distribution and, in the case of agricultural products, spoilage.
In order to move a currency from one bank to another you simply instigate a SWIFT message and an electronic transfer will transmit the funds. Currency is currency, an equity is an equity, but oil for example comes in many different chemical compositions. If the buyer of a US Treasury bond or US equity lives in Shanghai and the seller lives in the US, we do not need to send the bond/stock on a ship or a plane; we will either use custodians or hold the instruments ...
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