According to the above criteria, gold meets all the necessary requirements, so we can say that yes, gold is a commodity. Like silver and other precious metals, it is a basic metallic element. As such, it is described as fungible, identical and fully interchangeable. When it comes to fungibility, yes, gold is a commodity.
Any ounce of gold is interchangeable with any other ounce of gold (of the same purity). But that's where the similarity between gold and other commodities ends. This is largely due to the significant dispersion in commodity performance, particularly since oil performs so poorly and other commodities such as gold perform so well, as evidenced by the overall commodity returns of -24% and -3%, compared to a return on gold of 25%. In short, history has given gold a power that exceeds that of any other commodity on the planet, and that power has never really disappeared.
This ample liquidity allows investors to access gold in a variety of ways, which are particularly important compared to other commodities, and highlights how gold works in a differentiated market (Focus). In general, future curves have a smaller impact on the profitability of gold and other precious metals compared to most other commodities. In particular, strategic allocations ranging from 2 to 10% can significantly improve and protect the return of an investment portfolio, while providing the exposure desired by the commodity investment itself. It is also worth noting that gold represents almost 40% of the total daily OTC open interest on all commodities (a percentage that has been increasing steadily) and that other precious metals account for only 3%.
While gold fits this definition, its market dynamics and the diversity of its applications make it very different from other commodities. However, the storage costs of physical gold are negligible compared to those of other metals, while commodities such as natural gas incur extremely expensive storage costs, and most of those securities are not satisfied with physical delivery. The Bloomberg Commodity Index (BCOM) places greater emphasis on liquidity and economic importance, increasing the weighting of gold, compared to the 26-pence GSCI index, which weighs less than gold. And as mentioned earlier, there are six main differentiators between gold and the broader commodity complex.
Sometimes, the two commodities move in the same direction, other times in opposite directions (graph), but there is no coherent relationship between the two.