What are the different factors that influence the price of a commodity, such as weather, geopolitical events, and technological advancements?
Curious about commodities
There are various factors that can influence the price of a commodity in the market. Here are a few examples:
1. Supply and Demand: The basic economic principle of supply and demand plays a major role in determining commodity prices. If the demand for a particular commodity exceeds its supply, its price is likely to rise. On the other hand, if the supply of a commodity exceeds the demand, its price may fall.
2. Geopolitical Events: Geopolitical events such as political instability, wars, and natural disasters can have a significant impact on commodity prices. For instance, if there is unrest in an oilproducing region, it can lead to a decrease in oil supply, which can result in an increase in oil prices.
3. Weather Conditions: Weather patterns can also impact commodity prices. For instance, unfavorable weather conditions can reduce crop yields, which can increase the price of agricultural commodities.
4. Technological Advancements: Technological advancements can also impact commodity prices. For instance, the discovery of new drilling techniques can increase the supply of oil, which can lower its price.
5. Currency Fluctuations: Commodity prices are often quoted in US dollars. As a result, fluctuations in currency exchange rates can also impact commodity prices. If the US dollar appreciates, commodity prices may fall, and vice versa.
It is important to note that these factors are not exhaustive, and there may be other factors that can also impact commodity prices.