Commodity price, in very simple terms, is dictated by the classical law of supply and demand. However, analysts also consider global economy in the rise and fall of a commodiy price. As such, rapid growth or development in some countries may affect local rates or commodity price.
Years ago, mining and agricultural products are on top of commodity price charts. But now, it may be said the petroleum products such as oil may dictate commodity price even of other basic goods. When oil prices go up, commodity price for other products are also on the rise. Perhaps, this is because transportation directly affects the delivery of goods and services. Aside from price of other important goods, wars and calamities may incure chances in commodity price of goods.
How Monitoring of Commodity Price Helps
To gain an upperhand in trading, brokers need to understand factors affecting the movement of commodity price such as supply and demand. Consulting a broker when to buy raw materials or goods you need for your business may help you secure a lower commodity price. Commodity brokers may advise you when is the right time to buy and what to expect from the trade. There are times when a commodity may be swapped with another good. Despite this kind of transaction, it's best to know the current commodity price of goods you will trade.
Timing is highly important in trading commodities. With a lower commodity price, buyers may benefit from higher profits. Sellers, on the other hand, choose to trade their goods at higher commodity price. Amount of supply may also determine if the commodity price will favor sellers or buyers in the market. Knowing how commodity price may surge or fall will help traders make a better investment or trade decision.
What Affects the Commodity Price Movement
Major economies may affect even local commodity price of goods. This is one of the many effects of gloablisation. As countries may participate in open trade through exports and imports, the commodity price may go up and down based on market performance. With more competitors in the field and higher supply, there's a possibility that commodity price may fall. But with higher demand, the price of commodities may surge.
Fluctuating interest rates also influence the movement of prices. Political instability or news of a possible war attack may incur erratic changes in commodity prices. This is because traders and investors watch closely how market conditions may affect their revenues and losses.