Chapter 11 · 5 of 100 marks · workbook pages 218-227
Fundamental Analysis of Commodities
Supply and demand drivers, producers and consumers, the dollar and currency effect, global and domestic price links, crop and weather reports, inventories, macro indicators, policy shocks and hedging.
Focus
- Supply demand
- Major producers and consumers
- Currency and dollar index
- Inventory and production data
- Weather
- Policy
- Hedging
Must know
- Commodity prices are driven mainly by supply-demand balance, inventories, currency, global linkages, weather, and policy.
- Dollar strength often pressures dollar-denominated commodities, all else equal.
- Hedging uses derivatives to offset price risk; hedge ratio links exposure to futures position.
Traps
- Commodity analysis is not only chart-based.
- Domestic prices can diverge from global prices because of currency, taxes, duties, and local supply conditions.