FX168 Financial News (North America) News Not all that glitters is gold; this is because other raw materials are just as dazzling.
Darrell Marti (Darrell Marti), CEO of Apex Trader Funding, told “Business Insider” that commodity trading has been booming in recent months, and the market for various commodities, from industrial metals to petroleum, is hot.
“The market volatility brought about by these large swings has created plenty of opportunities,” he said. “This provides plenty of opportunities for traders to enter the market and earn revenue in this way.”
The rise was driven by a sharp rise in various physical materials, which has enabled the commodity based S&P GSCI index to rise 12.8% this year, far exceeding the 7% increase in the S&P 500 index. According to Bloomberg, this triggered the most profitable period in commodity trading history. Since 2022, the top four private trading companies have netted profits of 50 billion US dollars.
“This is a typical late-cycle commodity rally,” Jeff Currie (Jeff Currie) of Carlyle (Carlyle) told CNBC on Wednesday. “We are watching global economic growth. Industrial production has bottomed out and has begun to expand; this is happening in a situation where inventories are low and there is not much backup capacity.”
Market experts say there are two key factors behind the strong rise in the commodity market, namely inventory shortages and global economic uncertainty.
Inventory shortage
Low supply is a major factor driving up the prices of commodities such as copper and cocoa.
“The copper supply crisis has arrived,” the Bank of America wrote in the headline of a Monday report: “Serious shortages in copper supply are increasingly limiting refining production: the lack of mining projects that everyone is discussing is finally beginning to show.”
The bank said the metal is expected to reach $5.44 per pound in 2026, up 27% from the current $4.28 per pound.
Copper prices have risen 11.6% so far this year, and both Currie and Martin have linked this boom to a post-pandemic rebound in production. However, according to Bank of America, copper is also the center of energy transformation, and as artificial intelligence data centers expand, copper will further benefit.
Cocoa is in a similar situation. Drought and poor harvests have caused the price of this raw material to soar to a record high. Cocoa futures prices have risen 256% over the past 12 months, reaching a record price of $10,900 per ton.
A recent article in the Wall Street Journal suggests that while this may seem like doom for producer countries, climate change could cause future shortages of agricultural supplies. Coffee beans are likely to face the same fate, and this product is already booming this year.
Uncertainty in the global economy
The imbalance between supply and demand also extends to crude oil, and the uncertain macroeconomic outlook is another factor affecting the momentum of oil and gold.
Gold has risen nearly 15% so far this year, although some of the gains are due to poor performance in 2023, Martin said.
“Gold is always lagging behind. When it finally went up, the increase was huge.” Gold once again hit a record high of $2,424 per ounce on Friday (April 12).
Continued inflation, massive central bank purchases, and geopolitical turmoil have fueled the rise of this safe-haven asset. As a result, Martin believes that within three to five years, the price of gold will quadruple.
Other predictions aren't as bold, but analysts such as Ed Yardeni (Ed Yardeni) and David Rosenberg (David Rosenberg) expect gold to rise 50% and 30% over the next few years. Yardney also predicted that if the conflict in the Middle East escalates, Brent crude oil will reach $100 per barrel.