Commodities Explained: Beyond the Glitter of Gold

Written By Luke Kroeplin, CFP®

Table of Contents

Why Commodities Spark Curiosity

When people talk about investing, stocks and bonds usually dominate the conversation. But sooner or later, commodities—like oil, corn, or gold—enter the discussion.

Commodities have an aura of mystery. They’re physical, tangible, and tied to the daily essentials of life. And for many, the idea of owning gold feels like a timeless way to protect wealth.

But do commodities really live up to their reputation? Let’s take a closer look.

What Counts as a Commodity?

Commodities are the raw building blocks of the economy, grouped into four main categories:

  • Agriculture: corn, wheat, soybeans, coffee, cotton.
  • Livestock: cattle, hogs, poultry.
  • Energy: oil, natural gas, coal.
  • Metals: gold, silver, copper, platinum, lithium.

They’re everywhere. The gas in your car, the bread on your table, and the metals in your smartphone all depend on commodities.

The Four Main Commodity Categories

Everyday essentials and materials that power the global economy.

Agriculture

Grains, coffee, cotton, soybeans — the foundation of global food and clothing supply.

Livestock

Cattle, hogs, poultry — essential for meat, dairy, and global agriculture markets.

Energy

Oil, natural gas, coal — fuels that drive transportation, manufacturing, and utilities.

Metals

Gold, silver, copper, platinum — used in technology, construction, and currency reserves.

Commodities form the backbone of the world economy — from the crops we grow to the energy and metals that build our future.

How Do People Invest in Commodities?

Unlike stocks, which represent ownership in a company, commodities are trickier to invest in. Common ways include:

  • Commodity-Based Stocks: Companies that mine, drill, or farm—like oil producers or agricultural firms.
  • Commodity Funds: Exchange-traded funds (ETFs) or mutual funds that bundle exposure into one investment.
  • Futures Contracts: Agreements to buy or sell at a set price later—used by professional traders and industries like airlines to hedge costs.
  • Physical Ownership: Buying gold bars or coins. Straightforward in theory, but storage, insurance, and security can be challenging.

Why the Appeal?

Supporters of commodities point to three main benefits:

  • Diversification: Commodity prices often move differently than stocks and bonds.
  • Inflation Hedge: When prices rise, the cost of raw materials can rise too.
  • Tangible Value: Unlike “paper” assets, commodities are physical goods.

Gold holds a special place—it’s beautiful, scarce, and historically prized. It’s often viewed as a “safe haven” during uncertainty, though it can also be volatile.

Looking Beyond the Shine: Do Commodities Deliver?

Here’s where things get nuanced. Commodities can play a role, but they’re not a magic bullet.

  • Volatility: Commodity prices swing sharply. A drought can send corn prices soaring, while an oil surplus can send prices tumbling.
  • Storage & Costs: Physical ownership brings logistical challenges.
  • Mixed Long-Term Growth: Gold, for instance, shines in crises but hasn’t outperformed stocks long-term.
    • A $10,000 investment in 1994 grew to about $220,993 in the S&P 500 vs. $66,644 in gold by the end of 2024.*
    • Source: NYU Stern, Historical Returns (1994–2024).

This doesn’t mean gold or commodities are “bad.” It just means their role is nuanced—not the headline-grabbing “safe bet” they’re often portrayed as.

Commodities in Context

Think of commodities as seasonings in a meal—they can add flavor, but they’re rarely the main course.

For most investors, commodities serve best as a short-term hedge or portfolio diversifier, not as a portfolio foundation.

A Thoughtful Approach Matters

Commodities raise important questions that go beyond performance:

  • How do global events ripple through markets?
  • Why do investors flock to gold when uncertainty rises?
  • What role—if any—should raw materials play in a retirement portfolio?

Exploring these questions can be just as valuable as deciding whether or not to invest.

Closing Thought

At Fortress Financial Group, we believe the right investment strategy should be tailored, not trendy. Commodities can have a place in some portfolios, but the ultimate goal is building a plan that supports your life, goals, and peace of mind.

About Fortress

Fortress Financial Group is an independent, fee-only fiduciary wealth-management firm in Rochester, MN. Our advisory team includes CERTIFIED FINANCIAL PLANNER™ (CFP®) professionals and other specialists. We combine proactive, lifetime tax planning with technology-driven clarity and personal care to help pre-retirees and retirees keep more of their wealth and make confident decisions about retirement.

Disclosures

Fortress Financial Group LLC (“FFG") is a registered investment advisor. Advisory services are only offered to clients or prospective clients where FFG and its representatives are properly licensed or exempt from licensure. For current FFG information, please visit the Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov by searching with FFG’s CRD# 315329. Investing involves risk, including the potential loss of principal. Past performance is no guarantee of future results."

This content is provided for informational purposes only and should not be construed as legal, tax, or investment advice. No investment strategy, including diversification, can guarantee success or prevent loss.

Any example provided is hypothetical and for illustrative purposes only. It does not represent any specific product or investment. Before making any investment decision, you should consult a qualified professional about your individual situation.

References

https://www.investopedia.com/terms/c/commodity

https://www.nasdaq.com/articles/is-gold-a-good-investment

https://www.cftc.gov/

https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

Luke Kroeplin, CFP®

Luke is the Strategy & Planning Manager at Fortress Financial Group in Rochester, MN. He directs portfolio management and risk strategy, translating complex market data into clear, actionable retirement plans for pre-retirees and retirees. A former U.S. Air Force firefighter who still serves in the reserves, Luke recharges by logging miles on local trails, devouring good books, and exploring Minnesota’s parks and lakes with his wife, Haley, and their four children.

https://www.linkedin.com/in/luke-kroeplin-cfp%C2%AE-4343bb134/
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