In curriculum page 51, it says “in periods of financial and economic distress, commodity prices tend to rise. In page 52, it writes commodity prices tend to decline during periods of weakness.
cannot be more confusing…
First one is a general statement regarding commodities.
The weakness I think is from a demand perspective. Weakness in economy -> lower demand -> lower price.
Can you elaborate a general one in the first statement?
the weakness justification cannot be applied to first case?
It depends on the type of commodity.
Oil - affected by demand based on consumption => drops with weak economy
Gold - affected by demand based on sentiment => rises with weak economy
Before economy switch into downturn, commodities peak. That exactly what happened in 2008. Google Baltic Dry Index historical chart. This is an excellent proxy for commodity prices.