A raw good traded in markets, such as oil, gold or wheat.
A commodity is a basic raw material that is the same no matter who produces it: oil, natural gas, gold, copper, wheat or coffee. Commodities are traded on exchanges, often through futures contracts.
Example
A barrel of crude oil from one producer is interchangeable with another of the same grade, so they trade at one market price.
Why it matters
Commodity prices feed directly into what you pay for gas, food and goods, so they drive inflation. Gold is also used as a hedge when investors are nervous.