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Markets
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Current Markets
Energy Commodities
Despite the growing global shift towards renewable energy sources, gasoline and oil continue to dominate as primary energy sources for various sectors, including transportation by vessels, aircraft, and automobiles. With the annual increase in the global population, the demand for fuel rises alongside it. Major economies such as Brazil, Russia, India, and China are significant consumers of oil and gasoline.
Similar to other commodities, the primary determining factor of oil prices is the interplay between supply and demand in the market. However, the cost associated with extracting and producing oil also significantly influences its pricing dynamics.
The demand for oil is multifaceted, encompassing various sectors such as transportation, including gasoline for automobiles and aviation fuel, as well as energy generation for electricity. These diverse demands collectively contribute to shaping the overall demand for oil in the market.
During the winter and spring months, countries in the Northern Hemisphere typically begin stockpiling gasoline in anticipation of the summer season. As people embark on holidays and trips during this time, the demand for fuel surges, leading to potential price increases. However, this heightened demand also introduces the risk of volatility. Disruptions in the supply chain, such as snowstorms affecting refineries or breakdowns due to extreme weather conditions, can cause prices to spike even further. For instance, if refinery operations are disrupted by arctic freezes, the transportation of gasoline to the Northern Hemisphere may be hindered, resulting in price spikes during the summer rush.
Heating oil, also known as Number 2 Fuel Oil, is another essential energy product, particularly during the winter months. It accounts for approximately 25% of all crude oil production, second only to gasoline. In regions like the Northeastern United States, heating oil constitutes around 80% of total usage for winter heating. As colder weather sets in, the demand for heating oil rises, leading to increased prices. Similar to gasoline, disruptions in the supply chain, such as hurricanes affecting transportation from Gulf refineries, can exacerbate price volatility.
Grains
Wheat
Wheat, often regarded as the most crucial food grain for humans worldwide, is witnessing a steady increase in demand alongside the rising global population. In the United States, wheat harvesting typically occurs between spring and early summer. During this period, and leading up to it, wheat prices tend to be low due to an abundant supply that meets the global demand. The influx of wheat into the market during the harvest season keeps prices relatively stable.
Farmers typically sow wheat for the winter season in September, which is a time when wheat prices often experience an upturn. Despite this, the cultivation of wheat is a delicate process. The planting window is narrow, and timing is critical; planting too early can lead to soil dryness, while planting too late may jeopardize winter survival.
This inherent sensitivity creates volatility, especially during September. Even minor disruptions during this period can significantly impact wheat production, leading to potential price spikes if market concerns arise regarding insufficient wheat supply to meet the demand.
Corn
Corn holds a pivotal role as a primary food source for livestock, particularly cattle, and is also a vital component in the production of ethanol, essential for gasoline in the United States. Corn also finds its way into various mass-produced and processed food products, including corn syrup.
Similarly to wheat, corn prices fluctuate throughout the year, largely influenced by the timing of the harvest. The most significant period in the annual corn price cycle occurs between mid-summer and the harvesting season, which typically spans from September to November. This period witnesses a surge in supply as the harvest floods the market, resulting in lower prices. Subsequently, between December and February, corn prices tend to reach their lowest point for the year, before gradually rebounding. Conversely, in June and July, corn prices peak due to depleting inventories and potential disruptions in the new corn production cycle.
Volatility is can be observed in particular between April and August, the growing season, as late planting may damage the crop, leading to concerns around supply levels and consequent price spikes. This volatility underscores the delicate balance between supply and demand during the crucial stages of corn cultivation.
Metals
Copper
Copper is one of humanity’s oldest commodities, tracing back thousands of years. Surprisingly, it serves as a barometer for the global economy due to its pervasive influence. Only iron and aluminum surpass copper in terms of worldwide usage. Its primary application lies in the construction industry and the industrial manufacturing sector.
Profiting from copper hinges on efficient mining practices, characterized by high volumes of copper being extracted at low costs. However, the copper supply chain often experiences volatility, largely influenced by the political landscapes of copper mining countries. Copper mining commenced approximately seven millennia ago due to its malleability, facilitating its use in tool production. Millennia later, the discovery that copper could be alloyed with tin to form bronze heralded the Bronze Age, cementing copper's status as a prized global commodity.
Aluminum
Aluminum has become indispensable in today's modern economy, finding widespread application across various industries. Its versatility is evident in aerospace, where it contributes to aircraft construction, as well as in packaging, largely as the ubiquitous beverage can. Aluminum also plays a crucial role in automobile construction and is utilized in numerous other sectors.The transportation industry stands as the largest consumer of aluminum, accounting for approximately 30% of production in America. The packaging and construction sectors each contribute significantly to aluminum usage, comprising 20% and 10% of aluminum usage, respectively. Aluminum is also a preferred material for electric transmission lines due to its conductivity and durability.
Precious Metals
Gold has maintained its status as a symbol of wealth and prosperity worldwide throughout history. Its allure is particularly prominent during festive seasons such as Christmas, as well as during south Asian festivals. Notably, India stands as one of the largest consumers of gold globally, with millions celebrating in festivals that involve the purchase of gold, between the months of September and December each year. China shares the spotlight as a significant gold consumer, with its growing middle class driving increased demand for gold.
In recent years, China's relaxation of regulations and licensing has facilitated a burgeoning gold market. Both foreign and local companies now have greater access, expanding consumer options. With China's thriving economy and burgeoning middle class, gold demand is projected to double over the next decade. Notably, the jewelry trade accounts for 64% of this demand, while investment demand has surged by 70% since 2010.
The gift-giving tradition during festive periods like Christmas and Valentine’s Day fuels demand for gold jewelry, leading to price spikes. Wholesalers anticipate this surge by stockpiling jewelry in preparation for the heightened demand during these seasons.
Gold has also emerged as an alternative investment avenue, particularly evident in retirement portfolios shifting towards tangible assets like gold over traditional paper assets. This trend reflects a desire for stability amidst global economic uncertainties and volatile markets, as gold is renowned for its ability to retain its value over time.
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Silver
Silver holds a rich historical significance, being lauded and cherished by people for millennia. Initially abundant and easily accessible, silver adorned countless relics, artifacts, and jewelry from ancient civilizations. Notably, silver played a pivotal role in the economic system of the United States, with the silver dollar being a cornerstone of the monetary system until 1965.
However, in the modern era, silver has found a new purpose beyond its monetary value. It has become a crucial industrial material, particularly in the construction and industrial sectors. The jewelry industry, electronics manufacturing, and photographic equipment also heavily rely on silver. This diversification of usage has solidified silver’s position as a valuable commodity, making it an attractive investment option.
Primary sources, such as newly mined metal from regions like Peru, America, and Mexico, largely contribute to the global silver supply. Additionally, secondary sources like scrap metal, melted-down coins, and hoarded supplies in certain countries also play a role, albeit being more price-sensitive.
To manage price risks associated with silver, investors often turn to tools like the COMEX Division silver futures and options contract. Similarly to gold, silver finds its way into investment portfolios, offering a hedge against economic uncertainties and market volatilities.
Platinum
Platinum plays a crucial role in various industrial applications due to its unique physical and chemical properties, similarly to other metals in its group like palladium and rhodium. While 51% of platinum demand comes from the jewelry trade, automotive catalysts and petroleum refining catalysts also account for significant portions of its usage, at 29% and 15% respectively. Additionally, platinum finds application in the computer industry, where its electrical conductivity and resistance to corrosion make it valuable.
Despite its importance, platinum faces challenges due to its limited availability. With only around five million troy ounces mined per year compared to much larger quantities of silver and gold, platinum reserves are relatively scarce. South Africa is the primary source of platinum, accounting for 80% of the world's production, while Russia and North America contribute smaller shares.
The combination of high demand, low production, and limited suppliers makes platinum prices prone to volatility. With few sources of platinum globally, prices can be influenced by a handful of players in the market. Consequently, some investors view platinum as an attractive investment opportunity, recognizing its value and potential for growth.
Coffee/Sugar
Coffee
Coffee, one of the world's most beloved beverages, enjoys staggering consumption levels, with over 400 billion cups consumed annually. The majority of coffee production comes from Brazil, Colombia, and Vietnam, with Brazil alone contributing over 33% of the global supply. Any disruption in Brazil’s coffee supply chain can reverberate throughout the world, causing significant price spikes if the country experiences issues like pests, diseases, adverse weather conditions, or a lack of rainfall, particularly during the crucial flowering period in October.
For those seeking Robusta coffee, Vietnam stands out as the leading producer and exporter. Robusta beans are commonly used for making instant coffee and are harvested in Vietnam between October and January. Disruptions to Vietnam’s coffee supply chains, such as extended rainy seasons or earlier-than-expected typhoon seasons, can lead to price spikes for Robusta coffee.
Coffee consumption typically surges during the winter months in the Northern Hemisphere due to colder weather, further exacerbating supply and demand dynamics. If disruptions occur in Brazilian or Vietnamese coffee supplies during these peak-demand months, prices can experience significant spikes. Additionally, prices often rise between November and May due to the Brazilian frost season, which can disrupt supply chains and impact global coffee prices.
Sugar
It's a well-known fact that sugar prices often reach their peak during the holiday months. With an abundance of festive treats like chocolate, cakes, cookies, and more being produced for Halloween, Christmas, and other celebrations, the demand for sugar skyrockets. This surge in demand during December typically leads to a year-end price peak, as the market adjusts to meet the increased need.
However, there are notable factors affecting sugar supply during this period. European sugar crops typically don't hit the market until later in the year, coinciding with the holiday demand. Additionally, Brazil, one of the world’s largest sugar producers, doesn't produce sugar between December and April. Any delay in the harvest due to extreme weather conditions can further exacerbate the volatility in sugar pricing.
Overall, the holiday season brings a confluence of factors that drive sugar prices to their peak, making it a critical time for sugar market dynamics.
Meat
Meat prices fluctuate throughout the year due to various factors influencing both demand and supply. Beef and steaks, in particular, experience seasonal shifts in popularity, with peak demand typically occurring between spring and summer. The warmer weather during these months prompts more outdoor barbecues and dining out, driving up the demand for beef products.
From March to May, the supply of meat often slows down, partly due to changes in animal birth rates and increased slaughter during the summer to fall months. This reduction in supply can contribute to heightened price volatility as the peak barbecue season approaches.
The price of corn, a primary feed for livestock, also plays a significant role in determining meat prices. Fluctuations in corn prices can directly impact the cost of raising animals, thereby influencing meat prices accordingly.
Between July and September, the market tends to experience an influx of cattle, leading to a surplus of beef supply. This surplus, coupled with declining demand after the peak barbecue season, often results in falling meat prices during this period.
Conversely, between September and October, after the barbecue season has passed, the market typically stabilizes with a robust number of livestock. During this time, the combination of lower demand and ample supply contributes to a decrease in meat prices.
Overall, the interplay between seasonal demand patterns, animal supply dynamics, and feed prices creates a complex landscape for meat markets, leading to fluctuating prices throughout the year.
