Have you wondered why commodities have suddenly become so expensive? This is all the more intriguing given that the world economy is still reeling under the effects of the Covid pandemic. The truth is Covid led to disruptions for people producing materials; for instance, Chilean copper mines shut down operations for much of last year. Moreover, most businesses had cut down their inventories because of the pandemic so as to minimize losses. You should always find the best commodity trading platform that offers you best price and commission. First you need to choose your choice of commodity and then move to finding the relevant provider. A detailed research online would give you sufficient information about the best commodity trading platform available.
Businesses has been trying to play it safe by cutting down on production. But, with vaccinations happening all across the globe, people started buying again on a massive scale. Now the problem is that companies will have to first start restocking their inventories and making more stuff. The supply chain has to be kick-started again and this starts with raw materials. At the same time, those producing materials are struggling to keep pace with the increase in demands. Suddenly, the entire world is facing a shortage of materials and prices are escalating as a result. Now it remains to be seen if this commodities boom is temporary or if it will continue to be there.
Why commodities trading is high now:
Commodities are basically raw materials from ranging from metals like copper to livestock; anything that can be traded via exchanges. These materials are involved in production of finished goods. If the economy is performing well, it automatically means there is more production from more raw materials. The bust-and-boom is not something new in commodities; they have experienced such cycles in the past too. The financial uncertainty triggered by the pandemic is the main reason why commodities are now the most popular trades.
For commodities, the past year was not at all bad; gold topped a record high $2000 every ounce and low interest rates led to this precious metal becoming more appealing than other assets. Gold is capable of acting as insurance in case the dollar weakens. This has occurred in history and with devaluation of fiat currency; one can expect gold prices to become higher. Investors are keen to include alternative assets to minimize overall risks and obtain greater benefits like additional opportunities to make more money, reduced volatility, and protection against adverse market cycles.
Studies have suggested that the agriculture and metal sectors are poised for major gains in 2021. A reason may be the fear of inflation, falling interest rates, and issuing of governments’ financial stimulus packages as the pandemic rages on. So, one can expect money to flow into commodities; people are likely to make long-term investments in agriculture and metals. Goldman Sachs predicts oil will make a comeback as vaccines are introduced and global travel returns.
Covid-19 has reaffirmed the need for a greener future; in keeping with this new trend it can be expected that people will invest more in energy this year. Finally, with countries like India and China putting in large amount of money to finance global infrastructure projects, it can be hoped that the demand for natural resources will go up and in turn, prices of commodities will increase. The world is steadily transitioning from a fossil fuel-driven economy to a green one and this change will need tons of materials, ranging from lithium to steel. This will ensure that prices of materials keep escalating in the years to come.