Managing Commodity Price Uncertainties

Commodity prices are notoriously volatile and hard to predict. Accurately divining how much, say, gold, copper or iron ore will trade for next year, or even tomorrow, isn’t possible. Despite the challenges commodities pose, investors and producers have little choice but to place their bets. Traders taking positions, as well as mining firms deciding whether to build new facilities or to ramp up production at existing ones, use projections. Forecasters usually rely on past patterns to dictate their predictions, but increasing instability renders most of them inaccurate. Take four steps to improve your forecasts:

1. “Understand your market’s ...