Is Gold a Commodity?

Gold is widely recognized as both a commodity and a store of value. Traded globally on major exchanges, it holds intrinsic worth and serves as a hedge against inflation, currency fluctuations, and economic uncertainty. Like other commodities, gold’s price is driven by supply and demand, market sentiment, and geopolitical factors.

However, unlike oil or agricultural products, gold’s enduring appeal as a form of money and wealth preservation gives it a unique position in global markets. Understanding gold as a commodity helps investors make informed decisions about its role in a diversified portfolio.

What Makes a Commodity?

A commodity has several definitions:

• An economic good (such as a product of mining)
• Something valuable or useful
• Something that is used for exchange within a market

Depending on the context, a commodity can be many things. Crude oil, corn, copper, and livestock are examples of commodities frequently traded throughout the world.

One key defining feature of a commodity is that its core value stems from its physical makeup. For example, corn, because of its physical makeup, can be food for people and animals. Copper is useful for conducting electricity. Crude oil provides energy to keep the world running.

Commodity prices fluctuate based on two factors — global supply and global demand. During times of scarcity, prices tend to rise because buyers are competing for the limited quantities available.

On the other hand, when there's an overabundance of supplies, prices tend to fall.

Understanding Gold Investing

Now that you understand what a commodity is, you can see why some investors classify gold as a commodity. Here's a closer look at investing in gold.

Gold as a Raw Material

Humans have mined and used gold for thousands of years. In fact, the earliest surviving gold artifacts date back to 4,000 B.C.E., when the ancient Egyptians created gold beads and other objects.

There is a significant difference between gold as a raw material commodity and other commodities like corn or oil — generally, gold isn't consumed or expended. Instead, the metal is highly valued for its unique physical and chemical properties, which allow it to be used for various applications:

• Medical devices
• Electronic devices
• Decorative applications

As a precious metal, gold is considered valuable because of how rare it is and how laborious it can be to extract it from the Earth's crust; gold's proportion of the crust is estimated to be about 0.005 parts per million.

Gold mining is an intensive, large-scale endeavor that requires advanced technology and equipment. Once raw gold is extracted, it's refined to high purity levels using advanced smelting processes.

According to the United States Geological Survey, global gold production in 2022 totaled approximately 3,100 tons. China led the haul, followed closely by Russia and Australia.

Key players in the supply of gold are central banks and treasuries with major reserves accumulated over the years. For example, Russia has 2,333 tons of gold in its reserves, while the U.S. has 8,133 tons.

When it comes to market demand for gold, jewelry is the leading player, consuming approximately 47% of its annual use. Bullion accounts for 37% of global gold consumption, while electronics applications account for 6%.

Gold as a Store of Value

Gold serves reliably as a store of value. An alloy of silver and gold was used in the first coins, which date to between 500 and 600 B.C.E. Gold continued to be a leading source of currency until the introduction of paper money.

Despite the widespread use of paper money, gold possesses several attributes that make it a good store of value even today. First, even a small amount of gold can carry worth. This is because, by nature, gold has a high value-to-weight ratio.

Gold is also fungible — its value doesn't usually change based on the form it's in, whether that's coins, bars, or something else. An exception to this rule would be a gold statue carved by a famous sculptor, which would not be considered fungible.

Finally, gold is so durable that it doesn't corrode or degrade easily the way other commodities do. These three characteristics are some of the reasons gold has continued to stand out as a treasured asset.

When paper money is debased through inflation, gold provides a hedge against economic instability. Data from the World Gold Council shows that the price of gold per ounce has increased considerably since the 1970s.

In 1970, gold cost $35 per ounce in the U.S. As of November 2025, gold is over $4,000 per ounce. The stability and reliability of gold as a valuable commodity can make it a reputable investment option.

Gold as a Tradable Asset

Gold has secured a position across global financial markets as a valuable physical commodity and a tradable asset. Investors who want to dabble in the world of precious metals have numerous options:

• Physical Gold Bullion in the Form of Bars and Coins: Provides direct ownership of gold but requires secure storage and insurance coverage
• Gold Exchange-traded funds (ETFs): Provide exposure to gold prices through shares backed by physical gold reserves
• Gold Futures: Contracts that establish a deal to trade gold in the future
• Gold Mining Company Stocks: Offer indirect exposure to the gold price, although they come with company-specific risks

While other commodities are largely driven by industrial production cycles, the price of gold fluctuates based on larger macroeconomic factors. So many variables affect gold prices:

• Inflation expectations
• Economic growth
• Market volatility
• Geopolitics

Gold has a unique trading dynamic that both attracts speculators and offers strategic opportunities for investors looking to diversify their portfolios.

Whether you might choose to invest in gold depends on factors like your risk appetite and goals. Although the price of gold has risen over the last several decades, owning physical gold doesn't provide interest gains or returns. This is one of the reasons why investing in gold can be a great strategy for some investors but detrimental for others.

Debating Gold's Commodity Classification

Is gold a commodity? The answer is complicated. Gold isn't a simple commodity; it is considered a hybrid asset, possessing characteristics of both commodities and financial instruments.

The differences between gold and conventional commodities like corn, oil, or copper have led to widespread debate about how to categorize gold. Agricultural goods and other traditional commodities differ from gold in their supply dynamics and physical utility. However, gold still shares common features as a raw material.

Rather than trying to determine the most appropriate label for gold, investors should focus on the benefits that gold investments can bring to their portfolios, including diversification and hedging against inflation.

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The Complex Challenge of Classifying Gold

Gold occupies a unique place between currencies, commodities, and alternative assets. While it shares some common ground with raw materials like crude oil, gold has cultivated a special role as a stable store of value and inflation hedge against economic uncertainty.

This distinctive identity gives gold a place in portfolios beyond simple commodity exposure. As an investor, you should evaluate gold based on its strategic merits.

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