NEW YORK: Commodities rose to their highest in almost eight years amid booming investor appetite for everything from oil to corn.
Hedge funds have piled into what’s become the biggest bullish wager on the asset class in at least a decade, a collective bet that government stimulus plus near-zero interest rates will fuel demand, generate inflation and further weaken the US dollar as the economy rebounds from the pandemic.
The Bloomberg Commodity Spot Index, which tracks price movements for 23 raw materials, rose 1.6% on Monday to its highest since March 2013.
The gauge has already gained 67% since reaching a four-year low in March.
The day’s gains were helped by copper, which rose above US$9,000 a tonne for the first time in nine years. Oil also jumped on speculation that global supplies are rapidly tightening, while coffee and sugar advanced.
“Folks who have really ignored commodities for quite a long time are now starting to get positioned, ” said Bart Melek, head of commodity strategy at TD Securities.
“The implication is that this could go on for a bit. It’s very much a function of expectations of scarcity.”
JPMorgan Chase & Co said earlier this month that commodities appear to have begun a new supercycle – an extended period during which prices are well above their long-run trend. That echoes similarly comments from others including Goldman Sachs Group Inc. Commodities have seen four comparable cycles over the past 100 years.
The asset class is typically seen as a good hedge against inflation, which has recently become more of a concern among investors. — Bloomberg