Commoditiesmay be volatile and subject to a lot of momentum. Money managers consider them a good alternative to stocksand bondsand are commonly used for portfolio diversification, and, in some cases, hedging.
Investors fearful of inflation typically buy precious metals, such as gold, to compensate for the slumping dollar.
The globalization of trade followed by the introduction of exchange traded funds have generally made commodities more accessible and certain subsectors more attractive. Take agricultural commodities. Droughts from Mexico to Argentina are shrinking cornstockpiles to a five-year low, raising the prospect of a bull market.
Geopolitics can also figure into an equation. Imposed sanctions on Iran over its nuclear program has caused fears of a decline in crude oil supply, lifting prices of oil and derivative
Iran has threatened to halt crude tankers passing through the Strait of Hormuz in the Persian Gulf, a prospect that could raise prices even more. On the other hand, a peaceful resolution would bring a sell-off.
So, tell what you think?
