MYTH-11. COMMODITIES ALWAYS OFFER ATTRACTIVE INVESTMENTS
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Commodities are a cyclical trade, where you buy when they are low and sell when high.
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But, commodity
investing is not this simple.
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First, you need
to know where the commodity cycle currently stands at.
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Then you would
need to estimate how those prices could move, especially those guided by global dynamics.
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The key factor
determining commodity prices are not the production costs at some mine.
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It is simply the
supply and demand dynamics that influence prices.
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Therefore, it is
very difficult to foresee how commodity prices will shape up going forward.
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In commodity trading, you are actually betting today on what someone else would pay for in six
months.