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Commodities uncovered: How to exploit the vital role of supply and demand

by , 04 September 2014

Supply and demand are perhaps the most important driving forces in economics.

These two factors play a very important role in the commodities market. Ultimately they determine the prices of commodities.

And they provide investors and traders a chance to make great profits too.

Let's take a closer look at the vital role of supply and demand in the commodities market…


The role of supply and demand on commodities


Supply and demand are very important forces in the commodities world. And these two factors can send the price of a commodity soaring.

There are several examples of supply and demand working their power with commodities, Bengt Saelensminde in The Right Side explains.

Let’s go back to a famous example in France in the 1780s. The price of bread went through the roof on the back of poor wheat harvests. This led landowners to fill their pockets. This then led to the Great Fear – a bloody revolt by the peasants.

If you can anticipate and invest in a commodity shortage at the right time, you can make a lot of money from it.

Let’s look at another example, this time a bit more recent…

In 2003, there was a shortage of rhodium.

This is a component used in cars and trucks. In just five years, the price shot up from $475 an ounce to more than $1,900 an ounce! That’s a gain of nearly 2,000%!


When supply dries up, demand rises


When there’s a shortage of something, it makes people want to buy more of it. And the same happens in the business world.

Take the rhodium example. As soon as a shortage became apparent, car makers started to stock up on rhodium. This just increased demand and drove the price higher.

So if you can pinpoint where the next supply shortage is coming, you could make a lot of money as the commodity rises up.

It’s not an easy task. But if you can find a commodity set to soar as supply dries up, you could be in a perfect position to make some tidy gains.

Commodity trading is risky. It’s a notoriously volatile market, but the gains could make it a lucrative venture for you.

So there you have it, how to exploit the vital role of supply and demand with commodities.

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Commodities uncovered: How to exploit the vital role of supply and demand
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