In recent years, commodities have emerged as part of the wider class of alternative assets. Increased inflationary pressures have also boosted the commodity appeal as an inflation hedge, with funds pouring money into the range of commodity spectrum led by oil and gold. As demand for goods and services increases, so does the price of the commodities/raw materials used to produce those goods and services. Futures exchanges thus act as a central financial exchange where people can trade standardized futures contracts, at a specified price with delivery set at a specified time in the future.
Trading in commodity futures can assist in managing risk by providing balance in the portfolio.