Commodities are basic goods used in commerce that are interchangeable with other goods of the same type. They can be categorized into two main types: hard commodities, like gold and oil, which are natural resources, and soft commodities, such as wheat and coffee, which are agricultural products. Investors often trade commodities to hedge against inflation or to diversify their portfolios. The prices of commodities are influenced by supply and demand dynamics, geopolitical events, and economic trends. For example, a drought can reduce the supply of corn, leading to higher prices. Understanding commodities is essential for anyone interested in investing or the global economy.