What is a commodity cycle?

Commodity prices go through extended periods during which they are well above or well below their long-term trends. But when charted together they display extended periods of price trends known as ‘commodity super-cycles’.

How long is a commodity cycle?

Commodity price supercycles are extended periods during which commodity prices are well above or below their long-run trend. They are expected to last much longer than business cycles, which, in Canada and the United States, have lasted six years on average in the post-war period.

Is there a commodity super cycle?

Commodities supercycles are a relatively rare phenomenon, where commodities trade above their long-term price trend over a long period. Only four commodities supercycles have been identified since the 19th century, each tied to a transformational period of economic development.

What is commodity volatility?

The term “price volatility” is used to describe price fluctuations of a commodity. Volatility is measured by the day-to-day percentage difference in the price of the commodity. The degree of variation, not the level of prices, defines a volatile market. Volatility provides a measure of price uncertainty in markets.

How high can copper prices go?

Copper prices could rise to $20,000 a ton within three years if inventories dry up, Bank of America says. If copper inventories run out, the metal could exceed $20,000 a ton by 2024, Bank of America said.

Why are commodities so high?

Many factors are driving the increases, including ultra-strong consumer demand and supply-chain bottlenecks. Central bankers must decide whether they can keep looking past commodity-price increases, along with other signs of higher inflation, or must move faster to cool demand through rate rises or other moves.

Which is the most volatile commodity?

How Volatile Are Commodities Compared to Other Assets?

Why is Romex so expensive 2021?

These price increases are due to factors such as China’s economic recovery from the pandemic, sustainable green energy stimuluses, and supply disruptions. The following graph shows a trend in the last 6 months (August 2020 through February 2021) of copper prices steadily, yet rapidly, rising.

How can a commodity super cycle be identified?

While individual commodity groups have their own price patterns, when charted together they form extended periods of price trends known as “Commodity Super Cycles” where there is a recognizable pattern across major commodity groups. How can a Commodity Super Cycle be Identified?

Why is it important to understand the commodity cycle?

When trading commodities, understanding the commodity cycle is arguably the most important element in determining their future direction. This article provides an overview of the process and outlook on various commodities over the next 18-24 months.

When do commodity cycles enter a downswing phase?

Eventually, as adequate supply becomes available and demand growth slows, the cycle enters a downswing phase. While individual commodity groups have their own price patterns, when charted together they form extended periods of price trends known as “Commodity Super Cycles” where there is a recognizable pattern across major commodity groups.

How is the commodity cycle different from other asset classes?

Commodity Cycle – Key Points. Commodities are a fast-moving asset class, with about 35% more volatility than US equities, 2.3x the volatility of the US dollar, and 3x the volatility of 10-year US Treasuries Commodities are more of a pure trading asset class than stocks and bonds, given they are not cash-producing or yield-generating assets,…