When as a result of the rise in the income of the people, the demand increases, the whole of the demand curve shifts upward and vice versa. The various factors affecting demand are discussed below: 1. However demand and supply of all commodities change during different time periods. The Chinese authorities, worried about the economy overheating, recently tightened monetary policy in a bid to rein in price pressures. The decrease in demand does not occur due to the rise in price but due to the changes in other determinants of demand.
Other weather patterns such as too much rain, draughts, severe winters or unusually hot summers can also wreak havoc with agricultural commodities. When advertisements prove successful they cause an increase in the demand for the product. The Number of Consumers in the Market: The marketdemandfor a good is obtained by adding up the individual demands of the present as well as prospective consumers of a good at various possible prices. And given its sheer size it is sometimes difficult to ascertain the exact factors that are influencing the value of commodities. Therefore, production depends highly on climatic conditions.
Fresh Stock Market news updates delivered to any device. As technologies and tools are developed to improve the effectiveness of these factors, fluctuations in price will occur. Low condition of that economy reduces the purchasing power of people of that country so as a result demand of commodity will fall and it also affects overall movement of prices. Increase in Demand and Shifts in Demand Curve : When demand changes due to the factors other than price, there is a shift in the whole demand curve. As many as 103 commodities have been allowed for derivative trading. . Supply refers to the quantity of a commodity offered for sale at different prices during a certain period of time.
Similarly, when the consumers expect that in the future the prices of goods will fall, then in the present they will postpone a part of the consumption of goods with the result that their present demand for goods will decrease. The ultra low interest rates also made gold an attractive investment. As many as 103 commodities are allowed for trading of derivative. Some important factors affecting gold prices: i Physical Buying and Industrial Demand: the demand for jewellery constitutes two-thirds of the annual gold production, with India accounting for almost 27% of the total physical demand worldwide. Suppose that the supply and demand are both in balance, though inflation advances at a rate of 3 percent on an annual basis.
For example, at the time of Gulf War in Iraq—which was a main producer of crude oil —the price of crude oil fluctuated very repeatedly. Global and domestic economy Economic scenario significantly affects the prices of a commodity. There is daily, weekly inventory data release from London metal exchange. As the price falls below that level she enters the market. Decrease in Demand and Shift in the Demand Curve : If there are adverse changes in the factors influencing demand, it will lead to the decrease in demand causing a shift in the demand curve.
It depends upon seasons, national and international conditions and many other major factors affect its characteristics. Demand and supply of any commodity has a direct relationship with economic condition in the state. However as far as a commodity like Kapas cotton beans is concerned global factors affect less when compared to domestic factors. Internal peace and stability: Existence of internal peace and stability will increase the production and supply of a good. It is a futures trading process.
For example, if the price of coffee rises other factors remaining the constant, this will cause the demand for tea, a substitute for coffee, to increase and its demand curve to shift to the right. A deep freeze for instance in Florida can endanger the orange crops. As many as 103 commodities have been allowed for derivative trading. Consumer demand implies traditional way of investing in silver in forms of bars and coins. However, a positive manufacturing data has an opposite impact on the precious metals. These were mentioned previously but need further elaboration. The price pattern remains intact in gold and silver.
As economists have explained, much has to do with supply and demand. Speculators bring information into system at times fake or over hyped in-order to trigger the price movement in a particular direction. A report in Bloomberg says that any country exiting the euro would throw the common currency's continued existence into doubt. In this post, we have taken a view of factors which affects commodity market. Will soft growth fray the cotton markets nerves? Even if the investors expect an increase in the oil prices, you might not know how quickly the prices would advance. As a result of this increase in incomes, the demand for good grains and other consumer goods has greatly increased. So there are many factors that affect prices of commodities in the market and also affect purchasing and selling of contracts.
These goals and change in them affect the supply of the commodity. For example if we take the case of Potato when one year back it was barred from trading on the exchanges. A slight modification in weather conditions might affect the availability of commodities in the world market, thus weather condition affects the commodity market. Low condition of that economy reduces the purchasing power of people of that country so as a result demand of commodity will fall and it also affects overall movement of prices. If cost is reduced, demand becomes more and thereby necessitating more supply of the commodity. This is a resource that is required world-wide. Chinese output will fall 2.
Another important cause for the increase in the number of consumers is the growth in population. But often these early birds fall short of funds that could build their dream homes. Derivatives are another mode of trading in silver such as silver futures and options. As these factors sometimes work in opposite directions, it should also help to determine which of them are likely to dominate. Especially their Export and import policy for the purchaser and seller will have a huge impact on commodity prices. Speculators prefer to trade in futures and options to benefit from the futures price expectations so as to profit disproportionately from the price movements.