As time goes by commodity investing becomes more and more popular. When it comes to investing in commodities many things are worth considering. Some of the most important ones are geopolitical and macroeconomic factors that have a big impact on commodity price changes and fluctuations.
The conflict in Ukraine has resulted in massive supply interruptions, which has resulted in record-high commodity prices. For the majority of commodities, prices will be higher in 2022 than in 2021 and will likely continue that way throughout the medium term. There will be a 42% rise in the price of Brent crude oil in 2022, making it the most expensive year since 2013. For non-energy goods, the price increase is predicted to be 20% in 2022, with Russia and Ukraine exporting the most.
Prices are likely to reach a peak in 2022, but they will stay far higher than had been predicted. As a result, commodity prices might remain elevated for an extended period, depending on the degree of delays to commodity flows and how long the conflict in Ukraine lasts. An in-depth Special Focus segment focuses on the effect of the conflict on commodities markets and contrasts the present event with prior price increases. There was a decrease in demand for crude oil as efficiency improved and other commodities were substituted for it after prior price increases. In the event of a rise in food prices, more land was put to use for agricultural purposes. Efforts to help the poorest families affected by rising food and energy costs are a short-term priority for authorities.
Over the long run, they may drive improvements in energy efficiency, support investments in new sources of zero-carbon energy, and promote more efficient food production. In recent years, governments’ solutions have favored trade restrictions, price controls, and subsidies, all of which are likely to worsen the problem.
It was a roller coaster ride for the global commodities market in 2021, as several events rattled the industry. Immunizations, central banks kept interest rates low, governments injected money into the economy and stock markets soared to all-time highs; the dollar rocketed to multi-month tops in the global financial markets. In 2021, as shown on the ECN brokers website, crude oil prices rose for the first time in seven years as a result of improving global economic circumstances and a limited supply as major suppliers reduced output during the pandemic. Base metals, which move in tandem with the manufacturing sector, suffered a large price change in 2021 as a result of a supply restriction caused by mine and smelter closures as well as strong industrial activity. So, let’s find what are the commodities that can be beneficial for investors to invest in in 2022.
In the year 2021, gold prices saw a roller coaster ride after hitting an all-time high in August 2020. After governments and central banks throughout the world began distributing immunizations, the CME gold futures traded far below $2000 per troy ounce as the influence of coronavirus-induced global economic growth began to diminish. A rise in the value of other assets, such as stocks, bonds, and currencies, in 2021 will dampen demand for gold throughout the world. As of September 2021, the global gold supply was 3505.10 tons, almost unchanged from a year earlier.
Total gold demand in the first nine months of 2021 was 2755.80 tons, a decrease of 4.61 percent compared to the same period last year. With its long history as a store of wealth, inflation hedge, and safe-haven asset during troubled times, gold will be attractive to investors in 2022. There will be a lot of demand for gold in jewelry, ETFs, and central banks in 2022. We may see a significant drop in the first half of 2022, which would be good news for gold, notwithstanding the impressive expansion of other asset classes. It is projected that CME gold will trade between $1680 and $1980 per troy oz. and that MCX gold will trade between $567.10 and $708.90 per 10 grams.
When it comes to trading in 2022, the global silver market will be quite narrow, with movements influenced by both gold and other industrial metals. During the year, CME silver fluctuated within an $8 per troy ounce range, with a low of $21.41 per troy ounce and the highest of $30.35. At $949.58 per kg, MCX silver futures hit a year-end low of $752.62 per kg and a year-end high of $949.58 per kg on the domestic front. There was an 8.20 percent growth in global silver supply in 2021, while demand jumped by 15.29 percent to 1033.10 million ounces, the Silver Institute said in a press release on Thursday.
With a year-over-year growth rate of 15.29 percent, global silver consumption in 2021 was up from 9.98 percent in the previous year. Silver’s worldwide demand will remain strong in 2022, thanks to industrial areas with fast-expanding economic circumstances and fabrication demand. Manufacturing development and credit expansion in industrial countries is expected to increase demand for silver. With this forecast in mind, CME Silver is projected to trade around $20 and $30 per Troy Ounce, while Silver on the MCX is forecast to trade between $55,00 and $75,00 per kilogram.
In 2021, crude oil regained its lost luster, as global oil demand started to recover after the worldwide deployment of vaccines. As a result, crude oil prices have risen to their highest level in seven years. As a consequence of the repeal of movement limitations and the universal immunization rollout in 2021, consumer demand surged steadily. Various economic indexes indicate that the global economy will increase shortly. Because of this, oil producers steadily increased output, resulting in an increase of 95.59 million barrels of oil supply in 2021. The OPEC and the International Energy Agency (IEA) predict that oil prices will continue to rise in 2022 owing to increasing energy demand, with consumption expected to reach 100 million barrels per day.
Increased economic activity would lead to a rise in the demand for oil as a consequence of government and central bank attempts to maintain growth. Brent oil is expected to trade between $65 and $95 per barrel, while MCX crude oil is expected to trade between $57.99 and $86.98 per barrel.
The price of raw resources may be affected by weather and natural catastrophes throughout the globe. This may be an Australian bushfire, an American hurricane, or an earthquake from Chile. An example of this was the suspension of production at four large mines in Chile in 2010 due to an 8.8 magnitude earthquake, which affected nearly 20% of the country’s capacity.
Knowledge of production statistics from key producing countries, such as Chile for Copper or Russia for Nickel, is vital in determining overall output and supply. Various trade associations, research firms, and governmental agencies make their data public, as do individual corporations. In addition, new data sources, such as satellite imaging, may be used to look at supply chain sites of interest. Practically every human being on the globe is a consumer of goods that are essential to daily living in almost every country on the planet. Additional factors, such as the condition of the US housing market, might provide light on demand for commodities like copper. Politics in the places where commodities are mined may have an impact on the price of those commodities. When Iran attacked Saudi Arabia in September 2019, it shut down the country’s oil facilities, resulting in a loss of 5.7 million barrels of oil per day or nearly 5% of world output. This caused a 20% increase in oil prices, the greatest since Saddam invaded Kuwait 30 years ago. Iran’s seizure of the third tanker in the Persian Gulf, which had a substantial impact on the price of oil, in August last year (2019). Because most copper is produced in a small number of mines (the top 20 mines generate 40% of the world’s copper), periodic worker strikes against copper-producing mines may have a significant impact on copper’s price.