If you are an economist, minor changes on the market shouldn’t surprise you. Given that financial market is based on beating your competition, people are constantly trying to find something new and exotic to invest in. However, have in mind that if you got information from a friend that certain product or market will rise; you are already on the back foot. Timing is everything and those who are able to predict future market fluctuations are those who make the most money.
Funny enough, only a handful of individuals could predict recent market crash in 2008. Even the highest ranking public officials working for USA government didn’t see it coming. As a result many companies went under. Even though government tried to save number of them, their future still looks bleak.
Economists quickly realized that we couldn’t survive another, similar market shock. Because of that, entire market perception has changed. Like after every major market disturbance, this one opened the eyes of many investors. Suddenly, individuals were reluctant to invest into stocks and bonds. Instead, entire economy slowly started shifting towards commodities.
Main reason why commodities became so popular in short amount of time is their reliability. Simply put, every currency (no matter how strong), is bound to certain country or economic system. Due to the crisis, countries that were previously powerful lost their steam. On the other hand BRIC countries (Brazil, Russia, India, China) started gaining momentum. They owe success to commodities. It is well known that these countries are highly dependable on raw resources. Given that general prices of commodities rose in a short period of time, economy responded by increasing their strength. At the same time, precisely because their financial markets were underdeveloped (at least in comparison to those of western countries) they were not as involved in market turbulence.
Nowadays, commodity markets are perhaps the most popular financial markets in developed countries. People are trading with various derivatives in order to make bigger profit. Nevertheless, some investors still stick to stock and bonds, using commodity futures only as a mean for diversification. As the economy changes, we face imminent shortage of natural resources, including food and water. Based on that, prices of commodities can only rise in future. Furthermore, this trend led to many different companies being created. For example, if you wish to have retirement fund based on commodities, you can put your money into gold IRA company. Have in mind that together with economy, pension systems of many countries suffered. Bankruptcy of many companies led to loss of tax money. Have in mind that this is important part of the budget allowing to pay off retired people. Without it, public pension was nearly impossibly concept. If we add increased unemployment and change of demographics, it becomes clear why people are forced to contemplate about creating their own retirement fund. Also, this is a great opportunity for business savvy people to make additional money. By betting on constantly rising commodities, you are able to increase value of your retirement fund.