COMMODITY
9 May 2016 By PDSNETBasically 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. Basically, the price has been falling since its 2008 high, but swinging wildly. Following the outbreak of COVID-19 it fell to as little as $18, but has since recovered to around $60. So commodities are volatile and so are the shares of the companies that produce them. South Africa is a major producer of commodities, and its recovery from the pandemic in 2021 has been substantially "export-led" as it benefited from rising commodity prices world-wide.
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