Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
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Although precious metals are commonly touted as viable investments, many people still wonder: is gold or silver a commodity? With a rich history in numismatics and central bank reserves, these physical investments seem to toe the line between commodity and currency. Clearing up this confusion can give investors a more accurate perspective of the value of gold and silver and how they should play into their portfolios.
What is a commodity?
Before delving into the status of gold and silver, it’s crucial to get the definitions straight.
A commodity is a basic, interchangeable good used in commerce that is traded publicly on exchanges. The value of commodities is determined by futures prices, which represent the market’s consensus on the anticipated future price of a given asset.
Generally, commodities can be broken down into three primary groups: raw materials, agricultural products, and energy resources. Some common examples include precious metals, crude oil, natural gas, wheat, corn, and even coffee. Investors seek out commodities as a hedge against inflation, which tends to erode the value of the stock market and fiat currency.
The basic thesis is that the essential nature of commodities ensures demand remains high even during market declines. Many experts recommend at least a little exposure to commodities as part of a diversified portfolio.
Is gold or silver a commodity?
Gold and silver are considered commodities due to their exceptionally high demand, various practical applications, and inherent value. This is evidenced by the extensive trading volumes of these precious metals in commodities exchanges. In fact, gold boasts one of the most well-established and storied markets of all raw materials, only surpassed by crude oil. Although the silver market is small in comparison, it still rivals those of other commodities. Here are some of the reasons gold and silver are defined as commodities:
Practical Application
Both precious metals see widespread use across a variety of industries including automotive, renewable energy, jewelry, and electronics. Gold is renowned for its characteristic conductivity (of both heat and electricity), corrosion resistance, and malleability, while silver is sought after for its conductivity and reflectivity. These practical applications help create a firm foundation of demand upon which these commodities earn their status.
Fungibility
Fungibility essentially means that an asset is identical across individual units and, therefore, can be substituted for each other. This characteristic is critical for commodities as it allows for efficient trading, consistent pricing, and simplified investments. Gold and silver fulfill this criterion because these materials have strict physical characteristics that remain unchanged across different sources and samples.
Tangibility
Tangibility is a key characteristic of commodity assets. Investors imbue physical assets with a greater sense of privacy, ownership, stability, and security compared to more traditional assets. Physical forms of gold and silver such as coins, bullion, and bars meet this standard. However, paper gold and silver assets in the form of stocks, ETFs, or mining stocks don’t match this requirement.
Universal Recognition
Gold and silver are traded as commodities across the globe, underscoring the universal recognition of these safe-haven assets as inherently valuable. This is further reinforced by record central bank demand, as major economies continue stockpiling gold reserves. This widespread acceptance results in higher demand, higher valuations, and greater price stability — all of which reinforce the merits of gold and silver as commodities.
Limited Supply
Both gold and silver exist in limited supplies on earth. The value created by this scarcity and the widespread demand for these assets supports their titles as commodities. Although these precious metals aren’t used up like crude oil, natural gas, or wheat, their values are maintained by their natural rarity and the high costs of excavation.
Historical Performance
Gold and silver have been used as stores of value and mediums of exchange for millennia. The recognition of these precious metals as worthwhile investments is deeply ingrained in cultures across the globe, contributing to their status as commodities. Throughout their long histories, gold and silver have proven to maintain their value and provide returns for investors.
Divisibility
Divisibility is another essential attribute of gold and silver as commodities. Their ability to be easily divided into smaller units without compromising their intrinsic value or physical properties streamlines trading and simplifies evaluations. Fractional gold and silver products — defined as any asset lighter than the standard troy oz — offer various entry points for investors, optimizing flexibility and accessibility.
How gold and silver differ from other commodities
Gold is widely regarded as a commodity yet exhibits notable distinctions in this class of assets. Compared to the return of most commodity exchanges and even individual commodities, gold is one of the highest performers.
For example, crude oil prices went from $55 to roughly $69 between 2004 and 2026, marking only a 25% gain. Conversely, gold prices shot up from $416/oz to over $4,150/oz over the same period, notching a roughly 900% return. The graph below clearly shows this nearly 35x difference between the performance of these two major commodities.
Another critical difference between precious metals and other commodities is that gold and silver can be bought, sold, and held in their physical forms. For example, investors purchase digital or paper representations of crude oil or wheat instead of the actual products. This isn’t the case for precious metals, which come in various tangible asset types such as coins, bars, or bullion that investors can take full physical ownership of.
Why gold is a commodity vs currency
There’s a lot of confusion regarding the status of gold and silver as commodities versus currencies. Although these precious metals have been used as mediums of exchange, stores of wealth, and materials for coinage for thousands of years, they’re no longer considered currencies by the strict definition. Ever since the abandonment of the gold standard, no nation has used gold and silver as currencies. Still, gold retains monetary relevance today, as central banks continue to grow their central bank reserves of gold as a hedge against currency risk.
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