While everyone knows that supply and demand go hand in hand, the current situation is that the price is going down while demand for commodities has not fallen as much or not at all.
My understanding is the prices have dropped because of a current belief that future demand was not going to increase as much as in the past. Hence there is less urgency for the buyers to stockpile.
If that is the case then this period of downward prices will eventually ease when the normal forces of supply and demand come back into play.
In other words the prices have dropped much more than they should have if they were directly tied to current demand alone. There has been an over reaction to China's slowing economic growth. Some areas of growth need less commodities than others that is true but either directly or indirectly, the need for more commodities goes hand in hand with economic growth.
At the end of the day an increasing demand will eventually mean an increase in prices as supply lags behind.
All the above is Awoonga's economic reasoning only.
AVB Price at posting:
6.9¢ Sentiment: Buy Disclosure: Held
