Learn what moves a commodity's price
Commodities prices are driven by the forces of supply and demand, which means there are a variety of factors that can impact them.
Competition
The introduction of alternative technologies and goods can reduce the demand for older commodities. For example, the rise of renewable energies has significantly reduced investment in oil and gas.
New companies can also have a knock-on effect in the market – especially those with more efficient supply chains and faster production lines, as these will lower costs and be more appealing for shareholders.
Politics
Political events and policies can cause changes in prices if they have an impact on exports and imports. For example, increases in import duty can drive up prices.
Macroeconomics
A weak economy often lowers the demand for commodities – especially those involved in building and transport. Whereas a booming economy can result in increased demand which could lead to higher prices.
Seasonality
Agricultural commodities are particularly dependent on seasonal cycles that impact production and harvesting. Prices tend to rise when harvest forecasts are positive, and decline after the harvest, when the market is flooded with products.
Weather
Extreme weather changes and natural disasters can impact natural material production and transportation. For example, colder temperatures can freeze the ground or compromise the goods. Anything that impacts the supply chain, decreasing output, can cause market prices to rise.
