A fungible commodity is a commodity that is currently, or may in the future become, an underlying of recurrent/ tradable contracts in the spot markets, forward markets or derivatives markets. The units of a fungible commodity are interchangeably or easily replaceable in the market. Fungibility of a commodity depends on several factors including availability in a specific grade or condition (specifications), location (in a very close vicinity), cost/ price, etc.
Examples of fungible commodities include:
- Energy products: oil, gas, electricity, etc. For instance, oil, in its different grades and origins, is interchangeable.
- Refined products.
- Gold.
- Silver.
- Copper.
- Wheat.
- Cotton.
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