Which factors can affect commodity prices?

The correct answer highlights two critical factors that significantly influence commodity prices: supply and demand dynamics, as well as geopolitical events.

Supply and demand is a fundamental economic principle that governs the pricing of virtually all commodities. When the supply of a commodity increases or demand decreases, prices typically fall. Conversely, if the supply drops or demand increases, prices tend to rise. For example, if a new technology in agriculture boosts the yield of a crop, the increased supply may lead to lower prices. On the other hand, if a natural disaster disrupts production, prices are likely to increase due to reduced supply and steady or increased demand.

Geopolitical events also play a vital role in influencing commodity markets. Factors such as political instability, wars, and trade agreements can create uncertainty, which can affect both supply chains and demand forecasts. For instance, tensions in oil-producing regions often lead to spikes in oil prices as traders and investors anticipate potential disruptions in supply.

Other options, while they may contain useful information, do not encompass the breadth of factors affecting commodity prices as directly and significantly as supply and demand and geopolitical events do. Historical price trends and graphs can offer insights but are based on past performance rather than current supply-demand dynamics or international relations. Weather conditions certainly impact some