Commodities are once again starting to attract a lot of attention on a scale not seen since the Global Financial Crisis in 2008 as traders rush to capitalize on the biggest macro themes driving the markets from re-accelerating inflation, a looming global credit crunch to rising recession risk.
Regardless of whatever situation unfolds from here on in 2023, there is no denying that the current macroeconomic backdrop is fueling a “perfect storm” for Commodities.
We’re just over a quarter way into 2023 and it has already been a massive year Commodities – but this could just be the beginning of the markets’ biggest year since 2008.
This week’s ISM manufacturing and service gauges both fell more than expected, underscoring the potential economic damage from the collapse of several prominent banks from Silicon Valley Bank to Signature Bank as well as the disorderly implosion of Credit Suisse.
The labor market is also showing signs of softening, with job opening declining and jobless claims edging up. Friday’s payroll report may show job growth is slowing from a brisk pace earlier this year.
On the inflation front, there is growing evidence of price pressures re-accelerating. One of the signs is Crude Oil prices.
Oil prices skyrocketed 8.5% within literally “seconds” of the Monday open, after OPEC+ announced they would cut production by more than 1 million barrels per day – a surprise move, which has thrown fuel on the inflationary fire and stoked fears of a knock-on effect on the global economy as a whole.
As traders know – there is a strong correlation between inflation and Commodity Prices. When inflation accelerates at a red-hot pace, so does the prices of Commodities.
According to leading economists, OPEC’s move will “most likely” increase inflation and derail central banks’ efforts to bring down inflationary pressures. In recent days, some economists even raised their forecasts – signalling that the production cuts will lead to oil prices pushing back above $100 a barrel.
This monumental move, now enviably sets the stage for Commodity prices to hit fresh record highs in the months ahead as the sector continues to gather massive bullish momentum
Earlier this week, Gold prices came in striking distance of hitting all-time record highs reached in August 2020, while Silver prices racing above $25 an ounce.
Gold has been on an unstoppable run, skyrocketing from the $1,800 level at the beginning of March to above $2,000 an ounce this week – notching up an impressive gain of over 12%, in the past month alone.
Gold prices have now risen for a second straight quarter in a row – up over 28% from the November lows of $1,600 an ounce – scoring their biggest back-to-back quarterly gain ever in history – the rally might not stop there!
Whichever way you look at it, one thing is clear. Commodities are everyone’s favourite trade right now and that trend is set to continue throughout the rest of 2023. The explosive cocktail of events that is currently unfolding now ultimately positions Commodities as one of the most lucrative and must-have asset classes in every portfolio.
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:
