Understanding Commodity Risk and Return

Imagine an investor is considering adding commodities to their investment portfolio. They are aware that commodity prices can be volatile and that such investments may react differently from traditional equities or fixed income securities. As part of their research, they are trying to understand the risk and return dynamics associated with commodity investments.

One of the common risks associated with commodity investments is related to price fluctuations driven by supply and demand factors. Given this context, answer the following question.