What Affects the Price of Assets in Commodity Markets?

Commodities that are offered in commodity markets are influenced by a variety of factors that shape the price of the asset and affect its demand and liquidity.

The price of assets in commodity markets can be affected by many factors, including:

• Demand and supply. This is a major factor. If demand for a commodity is high and supply is low, prices go up. This can happen until supply is high and demand drops. At that point, prices will begin to fall.
  
  
• Weather conditions have a significant impact on the supply of certain commodities, especially the agricultural group. First and foremost, these are crops and livestock. In the event of severe droughts, floods, or hurricanes, the supply of crops falls, causing prices to rise immediately.
  
  
• Geopolitical events such as wars, coups, or sanctions have a significant impact on the supply of goods and therefore on prices. For example, disruptions in the supply of oil or gas from exporting countries are directly affected by this factor and instantly cause oil prices to spike.
  
  
• Economic conditions. Commodity prices depend on the state of the world economy. Thus, a strong economy causes an increase in demand for commodities and provokes a rise in prices. A declining or recessionary economy, on the other hand, reduces demand, causing prices to fall.

Monetary policy, particularly sharp changes in interest rates by central banks, also affects price formation. This manifests itself in the fact that when interest rates are low, demand for commodities increases as a hedge against inflation, such as gold and precious metals.

Speculation in the commodity market can play a key role as traders decide to buy or sell commodities based on their expectations of future price movements. This leads to price volatility, such as during periods of market uncertainty.

Prices in commodity markets are not only influenced by various factors, but also by their interaction.

What is the best time to trade in the commodities market on the exchanges?

There is no ideal time for commodities trading, as commodity exchanges operate at different times. The preferred time of day for transactions depends on both the commodity itself and the particular exchange, as well as on the chosen investment instrument.

Here are some examples of the most active periods in the commodities market, when trading volumes are usually higher than usual.

• CFD trading is possible around the clock - the commodities market operates continuously, subject to the session chosen for trading.
  
• Contracts for WTI crude oil, the benchmark for the US oil market, are most liquid between 09:00 and 14:30 (EST).
  
• Agricultural commodity prices change after the WASDE (World Agricultural Supply and Demand Estimates) report releases expected supply and demand data.
  
• The gold market has the highest activity at the opening of the London session - at 08:00 GMT.
  

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