Commodity prices and exchange traded funds (ETFs) have seen a dramatic jump in prices this year, but the growth in prices are tapering off. Are commodities no longer in high demand or are we just on pause?
The price of commodities surged from March to June, but growth has slowed since then, remarks Harvey Jones for The Motley Fool. For the long-term, investment guru Jim Rogers thinks the current commodities bull market will run till 2022. (More on Jim Rogers).
The spike in commodities prices was attributed to Chinese demand for raw materials and financial speculators looking to offset potential falls in the dollar and inflation. (How to play a weak dollar). The rally was not driven by a global recovery in trade and economic activity. Eventually, countries and especially emerging markets will be demanding commodities to feed and drive their economies.
There is a possibility of deflation, which could quickly reduce commodity prices.
Individual commodities have many different factors that affect the their prices. Commodities have varying economic cycles, most are non-correlated to equities and some commodities prices change with the weather. One of the basic factors is that of supply and demand.