Contributor, Benzinga
August 25, 2023

For thousands of years, gold has captivated humanity for its aesthetic appeal and value as a currency. In the investing world, the question of whether gold is a commodity (or perhaps something more unique) is regularly at the forefront of conversation.

What Makes a Commodity?

A commodity has several definitions:

  • An economic good (such as a product of mining)
  • Something valued 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 4000 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, who hold major reserves accumulated over years and years. For example, Russia has 2,299 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, however, 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 August 2023, gold is nearly $1,900 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: Provide direct ownership of gold but require 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.

Invest in Gold Today With Benzinga’s Top Brokers

Now that you understand the nuances around gold’s categorization as a commodity, you may be interested in including gold exposure in your portfolio. Benzinga has identified the top brokers for investing in gold and precious metals in 2023.

Try Pepperstone

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    Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74-89% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Pepperstone is a brokerage firm offering a wide range of commodities to choose from. The platform is user-friendly and easy to navigate, making it convenient for both experienced and novice investors.

One of the main advantages of investing in commodities through Pepperstone is the access to real-time market data and analysis. This allows investors to stay informed and make more informed decisions. The platform offers various tools and features that can enhance the trading experience and help investors manage their commodities portfolio effectively.

Pepperstone also excels in customer service, as they have a dedicated team that provides prompt and reliable support to their clients. Additionally, they have a wide range of tradable assets allowing you to diversify your portfolio through various markets.

The Complex Challenge of Classifying Gold

Is gold a commodity?

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.

Frequently Asked Questions


Is gold a currency or a commodity?


Gold occupies a middle ground between currencies and commodities and can be considered both. Unlike fiat money (government-issued money like the U.S. dollar), gold maintains intrinsic value because of its physical properties.



Why is gold not a commodity?


Gold differs from traditional commodities because it isn’t directly consumed and has unique financial attributes. Gold acts more like a financial asset than an industrial tool.



Is it smart to invest in gold?


Gold is a good diversifier for your portfolio, and investing in it may offer protection during economic crises.