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Hardening

Candlefocus Editor
In the commodities trading industry, hardening typically refers to a period of increasing prices and reduced volatility. During a hardening period, prices tend to rise across all commodities or markets, resulting in increased demand and reduced selling pressures. It is a countertrend from a downtrend, where markets witness price decreases and high levels of volatility. This market condition can be caused by a variety of factors, such as a reduction in the supply of certain commodities, increased economic demand, or geopolitical events.

In general, hardening is seen as a sign of a bullish market, as traders expect higher prices in the future. Traders often take advantage of a hardening period by making investments in commodities that are likely to perform better than the rest of the market during the trend’s duration. As hardening tends to be a positive phenomenon, the industry tends to take proactive steps to ensure its sustainability. For instance, commodities exchanges may take steps to reduce speculative activity, or increase margin requirements in order to curb excessive buying and selling activity.

In the banking and insurance industries, hardening usually refers to the adoption of stricter underwriting or lending practices. For example, banks may become more cautious when considering loan applicants in order to reduce potential losses. Similarly, insurance companies may adopt stricter criteria for considering insurance applications and increase premium rates in order to control their risk exposure. Hardening in the banking and insurance industries typically follows a financial crisis or a period of economic recession when these industries are exposed to greater risks.

Overall, hardening is an observed market condition where prices tend to rise across the board in commodities or other markets, or when lenders and insurers adopt stricter and more risk-averse practices. Hardening is seen as a primarily bullish phenomenon, but financial institutions may take proactive steps to ensure that it does not reach excessive levels and become unsustainable.

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