The commodity market is one of the famous market in which most of the trader trade in different types of commodities in order to make money. It is highly risky and volatile market as the commodity markets have an immense impact on the economy and the life of human being. Demand-supply is the key factor behind the volatility of the market as well as currency moves, geopolitical matters, economic growth and government policies are the other factors that influence prices of the commodity in the market. Typically, the commodities market is subject to rising and fall so many time so it is riskier to invest in a commodity rather than in the stock markets. An investor can take help of sebi registered investment advisor in order to gain more profit.
Before entering in commodity futures, an investor or trader should be prepared and ready to learn how the market works.
There are various factors available here that create an impact on the prices of the commodity.
Following are the main factors affecting prices of commodities –
1. Government policies –
Government policies also affect prices of the commodity. Especially their Export and import policy for the purchaser and seller will have a huge impact on commodity prices. Like for example, our government increases import duty on crude oil, its price will show a similar increase in the price of a contract.
2. Economic policy –
Prices of commodities are also affected by the economic and political events of the countries that are producing or using that commodity. Low condition of that economy reduces the purchasing power of people of that country so as a result demand of commodity will fall and it also affects overall movement of prices.
3. Storage and Transportation factors
Almost all kind of commodities needs to be stored prior to its distribution. It is not another financial product so inventory cost and storage do not affect such a large impact on the market prices.
4. Demand and supply –
Demand and supply are the important factors that force the movement of price in the commodity market. The rule of demand and supply plays the same role for both equity as well as commodity markets. However, demand and supply of all commodities change time to time. It depends upon national, seasons, and international conditions and many other major factors affect its characteristics.
5.Weather Situation –
A number of commodities traded in this markets are agricultural goods, and these goods production depends on the weather most of the good are based on the season. A slight modification in weather conditions might affect the availability of commodities in the world market, thus weather condition affects the commodity market.
So there are many factors that affect prices of commodities in the market and also affect purchasing and selling of contracts. The key point in the trading is that you need to prepare yourself on how to apply the tools to effectively achieve success in the commodity market. You can also take help of experts with their commodity tips, gold and silver tips and much more for better results.