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Introductory Technical Fundamental Economics Opinion Sectors International Regulatory Other Markets

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Definition

Shares of companies in the resource sector. Commodity shares are shares of those companies which manufacture, extract or sell commodities of various types. These shares are usually very volatile and we recommend that you stay away from them as their prices depend upon the prices of commodities that they sell, which in turn fluctuate due to international market forces which are outside the control of the companies themselves. Thus gold, platinum and coal mining companies are commodity shares whose share prices are determined by the prices of the commodities which they produce. Those commodity prices are usually set on international markets and can be very volatile. Sasol is also a commodity share because about 60% of its profits are derived from oil. Commodity shares are generally rand-hedge shares because the commodity they produce is sold overseas in a hard currency. They do badly when the rand strengthens and vice versa. To reduce risk large international mining companies invest in a number of different minerals. A good example is Anglo American which has interests in gold, platinum, diamonds and iron ore.

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