A barrel of oil, an ounce of gold and a bitcoin pay you nothing while you hold them. Beyond that, they differ in regulator, tax treatment and safety net, and the exam tests every difference.
Commodities are interchangeable raw goods. They include energy (crude oil, natural gas), grains (corn, wheat, soybeans), livestock (cattle, hogs), industrial metals (copper, aluminum) and precious metals (gold, silver). These tangible assets are priced by physical supply and demand, not by company profits. A client can hold them through physical ownership or four financial routes:
- Physical ownership: The client owns the good itself, usually metal coins or bars.
- Futures: A futures contract is a standardized, exchange-traded agreement to buy or sell a set quantity at a set price on a later date.
- Commodity pools and futures-based funds: A commodity pool combines investors' money to trade futures. A futures-based fund does the same in exchange-traded shares.
- Physically backed exchange-traded products: A trust holds metal in a vault, and each share owns a fraction of it.
Common mistakes
- Blanket SIPC answers: FDIC never covers crypto, but SIPC turns on security status (see the HIGH-FREQUENCY note).
- Gold trust at 15%: Bullion, coins and metal trusts carry the 28% collectibles cap. Only mining stocks get ordinary stock rates.
- Futures by holding period: A six-week gold futures gain is still 60/40, and an open contract is taxed at year-end without a sale.
Bottom line
- Commodities (energy, grains, livestock, industrial and precious metals) pay no income, so return is price change alone; they offer low correlation to stocks and bonds and a possible inflation hedge.
- Commodity futures are regulated by the CFTC under the Commodity Exchange Act, not as securities; SIPC does not protect futures (except in a special portfolio margining account) or cash held for commodity trades.
- Contango (later contracts cost more) creates roll losses for futures-based funds; physical holdings pay storage and insurance instead.
- Long-term gain on physical metal or a physically backed metal trust is collectibles gain taxed at up to 28%; regulated futures are marked to market at year-end and taxed 60% long-term and 40% short-term regardless of holding period.
Exam shortcut
First ask what the client actually owns. Coins, bars or metal trust shares signal 28% collectibles tax and storage costs. A futures contract or futures fund signals the CFTC, 60/40 tax and contango. For any token, run Howey and ignore labels like "utility." On protection questions, answer "never" for FDIC.
The full lesson (about 3,294 words, 22 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- B18
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