Financialization of Commodity Markets

Abstract

The meaning of commodity markets and raw material trading is very important for the shape of the world economy. In recent years, commodity markets, similarly to economics or financial markets, have been transformed. In the first decade of the twenty-first century significant fluctuations of raw material prices were observed. Moreover, many investors originating from financial markets started to be more and more active on commodity markets. Cheapening and easily accessible capital encouraged investors to seek alternative ways to multiply their assets, and one of the solutions was an increased exposure on commodity markets. The purpose of this article was the consideration of market financialization based on our own and other empirical studies as well as chosen theoretical concepts. A hypothesis was formed which reads: The result of the financialization of the commodity markets process is the increasing fluctuation levels of prices. The verification of this hypothesis is based on comparison analysis of the changeability of prices of chosen materials and the positioning of the investors groups in the period of 2007–2017. Furthermore other empirical studies conducted by other authors were analysed. Understanding the impact of financialization on the prices of goods requires an evaluation of its influences on the economic mechanisms shaping the situation on commodity markets. It was concluded that the financialization of the commodity markets has an effect on the increased fluctuation of chosen materials.