Commodities have done well so far this year, with the energy sector playing a prominent role and lean pig and steel prices soaring as general expectations for a global recovery.
Looking at commodity prices in the coming months, the market is not concerned about “the next strain of potentially mutated Covid in Europe,” said Adam Koos, President of Libertas Wealth Management Group. “The price development supports the thesis that the economy as a whole will continue to improve.”
The S & P GSCI Index since the beginning of the year
SPGSCI, + 1.41%,
The company, which tracks 24 exchange-traded commodity futures contracts, is up roughly 16% since March 24. The sub-index S & P GSCI Energy Index
SPGSEN, -3.74%
trades about 24% higher.
Investor optimism about the improving demand outlook from the introduction of the Covid-19 vaccines increased the chances of a permanent lifting of the lockdowns and contributed to a rally in commodities based on economic activity, says Fawad Razaqzada, a market analyst at the online ThinkMarkets broker.
However, that bullish outlook has “weighed on the assets of ports like gold and silver,” which have also been hurt by rising bond yields.
Gold futures
GCJ21, + 0.43%
GC00, + 0.43%,
Based on the most active contracts as of March 24th, silver trading has been cut by nearly 9% that year
SIK21, + 0.23%
SI00, + 0.23%
decreased by over 4%.
Razaqzada attributes Oil’s “oversized recovery” the rise from the historical decline to negative prices for West Texas Intermediate crude oil in April 2020, supply restrictions imposed by the OPEC + alliance, and an improvement in the demand outlook.
This year, beginning March 24, front-month futures for US benchmark West Texas Intermediate Crude Oil
CLK21, + 4.03%
CL.1, + 4.03%
Trading around 26% higher, with global benchmark Brent crude
BRNK21, + 3.89%
BRN00, + 3.92%
by 24%. Gasoline futures are among the energy commodities
RBJ21, + 2.08%
RB00, + 2.25%
are outstanding, by around 41%.
Regardless of how and where we work for our employers, oil and gasoline in particular point to higher global demand The trip should recoversays Koos.
Other commodities with oversized gains this year are also lean pigs
LHM21, + 1.89%
LH00, + 1.89%,
plus 45% and steel
HRNJ21, + 0.15%,
on the futures markets increased by over 40%.
An increase in Chinese demand after the first phase of the US-China trade deal, the destruction of Chinese pig herds caused by African swine fever, and the skyrocketing US demand for pork are behind the “fantastic” market for pigs in terms of export and cash Trading, says John Payne, Senior Futures & Options Broker at Daniels Trading. In seasonal terms, the best time for pig rallies is also in the summer, he says.
The strength of domestic hot-rolled coil steel in the American Midwest “clearly supports the theory that prices are forward-looking,” says Koos. There will likely be more government-led projects focused on infrastructure, and steel will benefit from those projects, he says.
However, the price of iron ore is increasing
TIOJ21, + 2.84%,
which rose nearly 7% over the year pales in comparison to the rise in steel. Some analysts warn that China Efforts to reduce pollution This can lead to restrictions on steel production as the demand for iron ore will take the first hit.
However, given the sizeable gains in commodities this year, the asset class “will likely need to take a little breather here,” says Koos. This does not mean that prices will “constantly” be reduced in the long term. “After such a strong move since late 2020, commodities could take some time to consolidate and hack sideways.”
Koos sees higher raw material prices in the future as long as the Invesco DB Commodity Index Tracking Fund
DBC + 2.26%,
A proxy for investing in commodities is above the previous support level at $ 18. If the DBC publicly traded fund is above this key level, “I want to be long commodities,” he says.
