Basically these are raw materials such as gold, silver, soya beans, sugar, coffee, steel, etc. Many commodities (such as gold) are traded in markets around the world. The gold price is set in the London market and the local mining companies have no control over it. So commodity companies are price takers, not price makers – which makes them high risk. They normally have fixed costs which are constantly rising and they must sell their output at a price which is determined by supply and demand on an international market. Commodities go through bull and bear phases. For example, the price of North Sea Brent oil reached a high of $144 per barrel in July 2008 – only to slump back to $43 per barrel by December of the same year. More recently, in 2016, oil fell as low as $28 per barrel, but has since recovered somewhat. Consider the chart:


Brent Oil Index (M-BRENT)

If viewing this term in a pop-up block within a lecture module or article, use the scroll bar at the bottom to see the whole chart or click to enlarge the image.

Obviously, any share that is based on such a commodity (like Sasol) will be extremely volatile and risky.

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