Food, energy, metal and crude oil prices affect our daily lives. For example, if a corn crop fails it will automatically affect your budget and what you eat; or if the crude oil prices rise then your gas expenses will also increase simultaneously. Thus, anything that impacts commodities will impact you. But one cannot ignore their importance in any investment portfolio that wishes to be balanced; commodities are usually less volatile, hence do not stick to traditional securities alone when you plan your investment portfolio.
Commodities have lost their sheen
The past decade has seen investors lose interest in commodities because of their inconsistent results and the increasing US interest rates coupled with the slowdown of global economy.
Time to give them their due
According to Goldman Sachs commodities are not getting their due as investors shy away from them. Commodity markets require a lot of time, money and expertise taking it beyond the reach of average investor who is short of all the three factors. Jeff Curie of Goldman Sachs has said that by overlooking the commodity market investors will actually lose, especially in the energy commodity field.
The crude oil market especially needs our special attention. This is the first time in over a decade when commodities are posting a gain. In the last one year, the crude oil prices have gone up by over 51%.
What is causing the rise in oil prices?
The commodity market works on the basic economic principle of supply and demand. Thus, when the supply is low and the demand high, the prices will automatically soar. So, whenever there are disruptions to the supply chain the demand for commodities will hike.
In the current scenario, the demand for oil is higher than the supply despite OPEC’s exit from production. The crude oil price is around $60-70 per barrel which is likely to create a demand for crude futures. The investment in oil wells has gone down which will result in greater demand and reduce supply.
Action to be taken
While it is true that the investors have moved away from commodities, it is also true that commodities have a risk element that cannot be ignored. It is not possible to predict epidemics, unruly weather, natural or man-made disasters which will negatively impact the commodity market. Hence, if you wish to steer clear of this form of investment you can choose easier options like Bitcoin Loophole, which will get you returns from the comfort of your home. But, like with all online investment options ascertain that Bitcoin loophole is not a scam before you invest.