Financialization of commodities drives up prices and volatility, impacting global markets.
The article explores how the rise of commodity investing by big investors affects commodity prices and markets. When institutional investors get involved, prices and volatilities of all commodity futures go up, especially for index commodities. The connections between different commodity prices and between commodities and stocks also increase. With financialization, commodity spot prices and inventories rise. Shocks to one type of commodity can affect prices of all storable commodities.