A commodity that is becoming more valuable as the price of a commodity is rising has been described as “gold” in an article by a financial consultant.
In a series of posts, analyst and author Matt Murphy writes in the Financial Post about what he calls the “gold rush” in commodity markets and how it is creating an opportunity for companies and people to buy more than they bargained for.
He says the surge in prices for some commodities such as gold has resulted in a boom in the “virtual” market, where consumers can bid on items in physical stores.
He also says the rise in prices is causing the government to respond by issuing more bonds to finance infrastructure spending.
The boom in gold prices, which has been growing since the summer of 2017, has been driven by the rapid increase in supply, Murphy says.
In July, the value of the benchmark gold ETF, the Russell 2000, surged nearly 3,500 per cent to $1,942 an ounce, a record for the index.
That is the highest price for gold in at least a decade, according to the Morningstar price index.
Gold has been a big driver of the recent boom in prices, but it is not the only commodity driving the price surge, Murphy writes.
A number of other commodities, including oil, natural gas, copper and nickel, have also seen strong price gains in recent months.
But Murphy notes that commodity prices are also driven by many factors, including demand from consumers, a growing middle class, and a weakening dollar.
“We have seen a lot of consolidation in the global commodities market over the last year or so, and the market has become increasingly globalized, with more countries taking advantage of cheap commodity prices,” Murphy writes on the blog.
“So while commodity prices continue to rise, we also have a lot more uncertainty in the future for our economy.”
In addition to the gold boom, Murphy cites an increase in consumer spending, which he says has also contributed to the price growth.
He writes that demand for commodities, particularly gold, is becoming increasingly important as countries around the world are spending more to buy their way through their current financial crises.
“While the commodities market is booming, the economy is shrinking,” he writes.
“The consumer demand for gold is growing, but so are the inflation rates of the commodities that we have to buy to keep the economy from shrinking further.”
The dollar is also a factor, he says, as it is still a very strong global currency.
When it was last trading at about 76.6 US cents per ounce in late March, it was trading at nearly 79 US cents a ounce today.
The dollar was last at around 70 US cents.
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