Title: Why Are Commodities More Volatile Than Other Assets?
Headings: Why Are Commodities More Volatile Than Other Assets?
Assets & Markets Commodities
Why Are Commodities More Volatile Than Other Assets?
Volatility: A Trader’s Paradise but an Investor’s Nightmare
Equity Volatility
Bond Volatility
Currency Volatility
Commodities
5 Reasons Commodities Are More Volatile
1. Liquidity
2. Mother Nature
3. Supply and Demand
4. Geopolitics
5. Leverage

Content: A drought in the United States might cause the prices of corn and soybeans to skyrocket as crop yields decline. We saw just that in 2012. A cold and frigid winter season increased demand for natural gas, sending futures contracts prices for the energy commodity skyrocketing. In 2005 and 2008, Hurricanes hit the Louisiana Coast of the U.S. and damaged the natural gas infrastructure causing the price of futures to rise to all-time highs. These are just a few examples of how acts of nature can cause massive volatility in commodity prices. 3. Supply and Demand
The major determinate for the path of least resistance for raw material prices is supply and demand. Commodity production occurs in areas of the world where the soil or climate supports crops, where reserves are present in the crust of the earth, and extraction can occur for a cost that is below the market price. Demand, on the other hand, is ubiquitous. Almost every human being on planet earth is a consumer of commodities, which are the staples of everyday life.