Over the last few trading sessions, stock market trading prices are on the upswing for many stocks, and this is being attributed to the rising commodity prices. But to be very frank, there are other reasons as well that have been pushing the stock market prices and they include business takeover bids, rising gold prices and energy stocks and the stimulus packages announced to boost the economy is also having a positive impact. Over the last weekend, the 20 biggest economies in the world pledged once more to try and do everything to boost the economy and this is obviously rubbing on well with the investors and traders.

Economists would tell you that when the supply of something goes down, its demand rises and this almost always leads to a price increase. The recent trend in commodity prices is however an exception to this. In most countries of the world, in recent times, there has been no substantial shortfall in commodities that include food, grains, metals etc., that can justify this raise, but yet, their prices are going up. Sure enough, in some countries where agriculture is still dependent on the weather, there is either drought or flood, and this can affect the global markets including the Australian Securities Exchange, because these countries are usually big experts as well. But then every year these situations do arise, and so this is nothing quite extra ordinary. However the fact remains that, the price of commodities are going up, and with this there is an impact on ASX and the other stock markets.

Impact Of Commodity Prices On The Stock Market

When the prices of any stock go up in the market, it is something like a vote of confidence from the investors for the company. Of course there are others who are not bothered about any of this and just take a note of the increase and jump in to buy and sell later at an even higher price, the margin being the profit.

But economically speaking, when the prices of commodities increase, it means that a company in question will earn more revenues. And if there is no dramatic increase in the costs incurred, it will obviously mean that the company will be able to increase its profits. This is not just good news for the company, but it is great too for all those who are part owners – the stock holders. Because of this reason, whenever the prices, commodities in this case go up, more people want to get involved with the stock of the company and buy it to be a part of the company’s increased profit.

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