Commodity Indices Definition

A commodity index is a tool used by investors to measure the performance of a basket of commodities in a given market. The value of the index is calculated by taking the weighted average of the prices of the underlying commodities.

Commodity indices are often used as benchmarks against which other investments are measured. For example, an investor may compare the performance of their portfolio to that of a commodity index to see if their investments are outperforming or underperforming the market.

There are a number of different commodity indices available, each with its own method for weighting and calculating the underlying prices. Some of the most popular indices include the Bloomberg Commodity Index (BCOM), S&P GSCI, and Dow Jones-UBS Commodity Index (DJ-UBSCI).