The commodity sector outperforms in 2022 as inflation persists
Head of Investment Research
Commodity markets have been in a bullish momentum since the start of the year, outperforming technology and financial sectors despite concerns over the impact of the Omicron variant on-their demand growth.
Strong commodity demands, supply outages, logistics disruptions, declining stockpiles, dollar weakness, and the ongoing geopolitical tensions have been key drivers of sentiment fuelling commodity prices to multi-year highs.
Investors have also shifted their funds to value sectors such as energy and raw materials, which stand to benefit from the steepest inflation in nearly forty years. (Over 4 decades)
Over the last year, rising energy and food commodity prices have been the primary drivers of overall inflation, forcing central banks to become more aggressive in normalizing their previously accommodative monetary policies.
The crude oil market has surged 15% so far this year, with the price of the international benchmark Brent climbing to as high as 87 dollars per barrel, its highest since 2018.
A similar picture can be found in Europe’s energy market, with natural gas, coal, and electricity prices skyrocketing to record highs following the Russia-Ukraine conflict, with record-low gas supplies from Russia, and below-average storage levels.
Looking at the precious metals, Gold and Silver they have reached a three-month high due to soaring inflation rates, while industrial metals Copper and Aluminium trade to near-decade highs.
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