Commodity Index


Commodity Index
Source: Tavaga

An index that measures the price of a physical commodity or the price of the commodity as reflected in its futures contracts (derivatives trading) on a commodity exchange.

Every commodity index is different in terms of the no. of goods that it consists of. For ex:- the S&P GSCI index comprises 24 commodities that consist of commodities like agricultural products, precious metals, energy products, livestock products, and industrial metals.

They also differ on the basis of weights given to different commodities. The underlying asset is just one commodity or a combination, but they are not equal in weight. For ex:- Dow Jones Commodity Index Crude Oil, Bloomberg Platinum Subindex, etc. 

How does commodity index work?

Commodity Index price depends on the underlying commodity. An investor who doesn’t want to invest in futures can invest in commodity indexes. Investing in commodity indexes doesn’t generate you returns like dividends or interest, instead one gains from the capital appreciation in price of the underlying commodity.

Recently, MCX launched a series of commodity indices called as MCX iCOMDEX Index.

An index which measures the price of a physical commodity or the price of the commodity as reflected in its futures contracts (derivatives trading) on a commodity exchange.