Are Commodities Priced According to Their Real Value or Like Financial Assets?

Since the earliest days of human existence, commodities have been among the most important necessities of our lives. From the time when food and shelter were the fundamental needs, the commodities in our lives have diversified, accelerated, changed, and been priced at different levels.

In the modern world, commodities are seen not only as assets needed for everyday life, but also as financial assets. One of the reasons for this is price elasticity. The pricing of an asset is based on the balance between supply and demand. The pricing of financial assets, however, is not directly tied to physical necessity; it is also shaped by buying and selling orders from traders and by market expectations.

Commodities are sometimes described as necessity-based assets. This is their real nature. However, due to the enormous scale of modern derivatives markets, commodities have also been heavily influenced by financial markets. Almost all commodities have experienced periods of excessive buying and excessive selling in derivatives markets that were not directly related to physical demand. This has taken commodities to the highest levels of financial asset pricing.

Today, gold ranks first with an asset value of around $30 trillion, while silver ranks fifth with approximately $3.74 trillion. Commodities can therefore be assets driven by real needs while simultaneously ranking among the top five financial assets in the world.

In the Bloomberg Commodity Index, commodities were in an upward trend from 2001, when global markets began to expand, until 2008, when markets collapsed. Although financial markets recovered rapidly after 2008, commodities experienced a significant decline until the COVID-19 period in 2020. At the beginning of the COVID-19 period, all financial markets, including commodities, showed an upward tendency, although commodities lagged behind in this race. From 2024 onward, commodities began their struggle to catch up with financial markets, only to enter a rapid period of selling at the beginning of 2026.

So, what happens now?

The most important drivers of enthusiasm in global markets during the millennium era were low interest rates and seemingly unlimited money creation. These two simple but powerful factors, which created excessive enthusiasm, have now begun to confront economic realities. The USD and EUR issuance by countries with reserve currencies has transformed commodity prices into financial asset prices, making it considerably more difficult to determine their real value.

Oil reached $146 before the 2008 financial crisis, while on April 20, 2020, it fell to -$37. This was the point at which oil, as a commodity, was almost completely treated like a derivative financial asset.

The reason I emphasize commodity pricing as the main theme of this article is that I believe commodities are heading toward a period in which they will experience sharp price movements similar to financial assets. I believe we will see periods in which geopolitical risks and difficulties in obtaining commodities directly will create shortages. In such circumstances, financial pricing could become extremely sharp, resulting in highly volatile commodity markets.

Here, I argue that when commodity prices are considered in terms of both their intrinsic commodity value and their characteristics as financial assets, sharp price movements can occur. While there are dozens of factors affecting commodity markets, the main question is whether prices will remain tied to the underlying value of commodities or whether they can move far above or below their real value as financial assets.

Financial market conditions may lead to extremely sharp price movements, and we may witness significant volatility in commodity markets.

I will share my interpretation of each of the factors affecting commodity markets, including supply and demand, global economic growth, industrial production, interest rates, central bank monetary policies, the US Dollar Index (DXY), inflation, global liquidity, geopolitical risks, wars and conflicts, trade wars and tariffs, countries' inventories and strategic reserves, production and consumption levels, seasonal conditions, climate and natural disasters, energy prices, transportation and logistics costs, technological developments, new energy investments, the economies of China and the United States, OPEC and decisions by producing countries, production costs, speculative positions in futures markets, ETF and fund inflows and outflows, government policies and export restrictions, changes in the reserve currency system, as well as market expectations and investor psychology, in the coming period.