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Factors affecting commodities

Eden

Oct 25, 2021 13:27

Supply and demand are important factors that affect commodities. 

Taking oil as an example, if the supply of oil is expected to be strong, and market demand for it does not change much, then the oil price will fall. Often, tensions in the Middle East affect the stability of the oil supply, resulting in a shortage of supply in the market, and pushing oil prices higher due to expectations for demand surpassing supply in the short term.


The second one is inflation. When inflation rises, investors need more money in exchange for goods due to currency depreciation, which will also affect the price of commodities.


Another important factor is dollar. Most international bulk commodities are priced in U.S. dollars. When the price of U.S. dollars changes, the price of bulk commodities will also change.


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