What is an Indirect Commodity?

An indirect commodity refers to goods that are not traded directly but are instead represented through financial instruments, such as futures contracts or exchange-traded funds (ETFs). These commodities typically involve underlying assets, such as agricultural products, metals, or energy resources, that can be affected by various market factors. Investors may use indirect commodities to gain exposure to price movements without physically holding the commodity itself. This approach can provide diversification and liquidity while mitigating some risks associated with direct ownership.