Investing in Commodities: Seasonal Factors Make Active Management Necessary

Just as the global economy has cycles and economic changes that play an important role in commodity supply and demand, seasonal factors also impact prices. Seasonality involves fundamental reasons behind price movement in different markets.

In this paper, we will demonstrate how the yearly calendar can be used as a guide for some commodity prices as supply and demand change throughout the year, not just in grains, but also in the energy and metals markets.

This paper provides trade examples using seasonal charts as guidance for positioning when taking seasonal factors into consideration. Long-only, indexing, and other passive commodity investing strategies may not address seasonal factors, treating investing in commodities as if they were equities, even though they are very different.

When considering strategies, seasonal trading can help or hinder a portfolio depending on whether one chooses to either actively manage seasonal trades or ignore the fact that seasonal factors exist altogether.