The latest report on commodities from the global giant JP Morgan says that a fresh commodities supercycle may just have begun, with years-long gains in the offing. According to the note, the last supercycle in commodities started in 1996, peaked in 2008, and bottomed in 2020 when oil prices went negative, the note explained. Both the upswing and downswing cycles in commodities lasted 12 years.
Now, the next upswing in the commodity supercycle is set to begin as heightened demand for oil is sparked by a post-pandemic economic recovery, according to the bank.
Whats Spurring this
As per JP Morgan, the “roaring 20s” will be accompanied by easy monetary and fiscal policy, a weak US dollar, and stronger inflation, all supportive for commodity prices.
Wall Street of course is betting on a strong economic recovery from the pandemic and hedging against inflation after some startlingly strong growth in US S&P 500 earnings.
Prices may also jump as an “unintended consequence” of the fight against climate change, which threatens to constrain oil supplies while boosting demand for metals needed to build renewable energy infrastructure, batteries and electric vehicles. Remember – if you Want 5G? You need silver! And want an electric vehicle? You need lithium, nickel and cobalt. Want to recharge anything at all? You need copper! And so on!
The price of silver has been trading at multi-year highs and is approximately $28 an ounce at the time of writing. Market volatility over the past year initially catapulted gold, an asset regarded as a safe haven. Before long, silver also joined the race higher and put the limelight on both the commodity and silver miners.
Silver is also getting more attention than gold in the near term as the term “short squeeze” has become the topic of conversation as silver is likely to be the next target for this. No wonder its almost at 8 year highs. ETFs like Aberdeen Standard Physical Silver Shares ETF are up 3.0% YTD in dollar terms and the real moves are likely now.
Similarly, Platinum-related exchange traded funds glimmered this week as the precious metal rose to a 6-year high on economic recovery hopes that bolstered bets of industrial auto catalyst demand, along with expectations for additional stimulus and a weaker dollar that would support demand for hard assets. On the demand side, analysts have pointed to last month’s 30% year-on-year surge in auto sales in China, the world’s biggest auto market. The rising demand for automobiles also supported demand for platinum in automobile catalytic converters that are designed to limit greenhouse gases from exhaust fumes.
Among the best performing ETFs this week was the Standard Platinum Shares ETF which increased 4.7%.
Now to copper! In March 2020, the cash price of copper hit a multi-year low of $4,617 per tonne on the LME. Then, recently, along with many asset classes, copper surged to reach the current multi-year highs of around $8,200. Sustained growth in copper demand is expected to continue as copper is essential to economic activity . Infrastructure development in major countries such as China and India and the global trend towards cleaner energy will continue to support copper demand. At the heart of the electric vehicle, copper is used throughout because of its high electrical conductivity, durability and malleability. And even more is used in charging stations and in supporting electrical grid infrastructure.
Oil of course continued to rise and continued its longest winning streak in two years, supported by producer supply cuts and hopes vaccine rollouts will drive a recovery in demand. This is the longest sustained period of gains since December 2018 to January 2019.
Are you going to miss this golden period!
Unfortunately, Indian investors mostly trade this longer term rally via stocks or via derivatives contracts – both of which may not be ideally suited to replicate the underlying commodity for various reasons especially for the longer term. Commodity ETFs are not still available in India except Gold. Short term momentum trading can of course be done in these and for that you need to look no further than our Trading Apps- https://www.plindia.com/tradeplus/
However, if you are a PL client, you needn’t worry! All you need to do is to go to https://pl.vested.co.in/ and open an international trading account in less than 10 minutes. Finish your risk profile, upload your proofs and after your account opening is confirmed, transfer funds (USD 250,000 per year under the LES scheme)!
Post that, you may invest in hundreds of stocks and ETFs (dollar denominated) as per your market outlook – and for free! Whats more , you can do this in fractions – meaning you can buy less than 1 share if you want! Doing this also gives you a dollar hedge in your portfolio which otherwise you would have created imperfectly via some other route.
If JP Morgan and other global experts are right, you need to be opening your Vested account soon! Don’t miss the bus!
Of course, if you are just beginning your investing journey and want to stick to Indian stocks , please do visit www.plindia.com for our latest research or www.plindia.com/strategyshop for our thematic and sector portfolio offerings.Remember , you can always visit Prabhudas Lilladhers official youtube page at https://www.youtube.com/user/PrabhudasLilladher
Whatever you do, don’t be lazy! The next 5 years may not the ones you want to remember as years where “you didn’t know how to!”.