Determining Commodity Prices

Like most other types of investment, commodity prices are driven by supply and demand. If demand for a particular commodity rises when there is limited supply, the value of the commodity will increase. 

Likewise, if demand falls and there is a large supply, the value of the commodity will fall. Though, if demand rises and supplies increase, there will be no change in the value of the commodity at all. 

The supply of a commodity can be affected in a number of ways, including employment issues, poor weather or new regulations (i.e. bad weather may damage crops and disrupt the supply of corn).  

The demand of a commodity can also change due to economic shocks, natural disasters or political issues (i.e. when inflation increases, investors will often turn to gold to protect the value of their capital). 

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