Commodity Market Analysis: Gold, Oil Prices, and Their Relationship

This report provides an analysis of the commodity market, focusing on gold and oil. It discusses the global relevance of gold as a precious metal and its importance in investment portfolios, highlighting its role in hedging inflation and impacting imports and exports. The report examines the price fluctuations of gold over the last 10 years, noting the influence of demand and supply, government policies, and interest rates. It further analyzes the changes in world oil prices, emphasizing the impact of supply and demand, political factors, and international conflicts. The relationship between gold and oil prices is explored, considering their effects on inflation. The report concludes with references to books and journals used in the analysis, offering a comprehensive overview of the dynamics within the commodity market concerning gold and oil.

Individual Report

INTRODUCTION
Commodity Market is a place where the mechanisation of the service and the products of the
raw material is done. Commodity exchange is done all over the world. Most of the products
which are traded in the exchange market are agricultural goods and raw material such as wheat,
grains, cotton, sugar, metals, oil, etc. Commodity prices are determined on the basis of the
demand and supply of it in the market. In this report, a commodity gold is taken which is
specifically a raw material and the use and importance of it in the whole world is explained.
Further an analysis is made on the changes of the prices of commodity in the last 10 years.
Moreover, the prices of oil are also analysed of the 10 years and the relation between both the
commodities is elaborated. Further, the relationship of the goods is examined with the help of the
tool of correlation and regression. The factors of demand and supply which have impacted the
prices of the products in the market is explained.
MAIN BODY
Discuss the commodity and its relevance globally.
The commodity which is chosen is Gold. It is a precious product which comes under the
category of precious metals. It is the one of the most effective and precious commodity in the
portfolio and for the purpose of investment. It is considered to be a superior product which has
delivered absolute and risk – adjusted return over the time period. It outperforms in the low
inflation and also has ratio of low volatility.
Gold is a product that has consistently stood separated in the consideration of its prices, yet
there have been late market advancements that expand on its current differentiators while
showing the significance of its job in a portfolio.
 The product boost in the activities exchange is in full impact, which can contrarily have
affected negatively on resources furthermore could propose a bigger portion to gold.
 The weight of gold in the commodities market indices is elevating and should keep on
expanding for the strategic allocation of resources.
 The volatility of gold is stable even there is a large amount of variability in the bonds,
equities, etc.
Importance of gold in the world:

1. Used to hedge inflation: Investors ordinarily purchase huge amounts of gold when their
nation is encountering undeniable degree of expansion of prices. The demand of gold
hike up during the inflation period because of its intrinsic worth and restricted supply. As
it can't be diluted or modified, gold can hold esteem value, superior to different types of
currency.
2. Effects the imports and exports: The currency’s value is highly dependent on the
number of import and exports. If the value of import is more than export than the
currency’s price decline and vice – versa. In this case, the countries use the gold reserves
and strengthens the value of its currency with the increase in the price of gold.
Give a brief discussion on how the price of the commodity is changing for the last 10 years.
Price of Gold: It is a significant component which is popular in demand even after it is a
rare commodity. It is an important part for the purpose of the investment portfolio. For
determining the price of any product, the demand and supply are the main elements. The concept
of demand and supply is followed and is supported by the features of its elements considering
gold as a precious metal. The World Gold Council, the organization responsible for the gold
industry that accounts for about 60% of global corporate gold production, says the price of gold
is influenced in many ways by governments and central banks. Monetary policy of governments,
interest rate changes, inflation policy, all of these influences the price of gold, which is often
used as the official currency reserve.
The price of gold in 2020 was 1788.324734 in the world market and it determine by the world
bank. From the above chart, it an be analysed that the price of gold is fluctuating since 2010. It
rises when the value of various currencies diminishes and the demand of it in the market rises.
Discuss the changes in the price of the world oil and how it is related to the change in the price
of the gold.
Oil was originally traded for its fundamental purposes, but over time it has become a
permanent fixture in the investment portfolio. Oil and its derivatives are characterized by high
liquidity, volatility and relatively high profit opportunities for investors. Price formation is an
imperative factor manipulating the oil market. The determination of the price of this commodity

is derived from the market mechanism known as the relationship between global and regional
supply and demand. The oil market differs from other commodity markets in certain
distinctiveness. The oil market exhibits significant deviations from the perfect market, where the
price range is just above marginal cost. There are many reasons, but mainly it is caused by the
attempts of dominant manufacturers to control sales prices. The quotation of the oil price
influences the pricing of all major oil producers and they regulate the oil supply in order to meet
the price targets. This market is also largely determined by political factors and internal
situations in the most important producing and consuming countries as well as international
conflicts.
The above chart shows the increase and decrease in the prices of crude oil. In the year 2020, it
has an annual price of 1770.254167 which is comparatively more from 2019. It can be seen that
the price of oil is continuously rising since 2015. It has a severe impact on the inflation all over
the world.
CONCLUSION

REFERENCES
Books and Journals