Introduction
Follow the drivers.
Unlike a company, a commodity does not publish quarterly earnings. Its price responds to the balance between available supply, expected demand and the cost of moving or holding it.
Supply
Harvests, production capacity, weather, inventories and disruptions can change how much is available.
Demand
Construction, manufacturing, transport and consumer activity influence how much of a material is needed.
Currency and rates
Global pricing, currency changes and interest rates can alter demand and the appeal of holding different assets.
Conclusion
Commodity exposure can diversify, but prices can move sharply. Understand the instrument and the risks attached to it.
Learn about commodities ↗