Commodity Prices From A Monetary Perspective (PREPRINT NUMBER 96-8)

Explanations of commodity price levels, or movements, commonly focus on the supply and demand fundamentals of the particular commodity, or else are assigned to speculative activity. Comparisons of metal price histories with monetary and other economic data support the argument that the supply of and demand for money are no less important in price determination than are the supply and demand of the commodity itself. That these relationships should exist is evident in the price identity and are consistent with monetary theory. The patterns developed have limited usefulness as predictors, but their recognition is essential for the construction of price scenarios for planning purposes.