(Bloomberg) – Commodities hit their highest level in nearly eight years amid growing investor appetite for assets from oil to corn.
Hedge funds have rallied around what has become the biggest bullish bet for the asset class in at least a decade, a collective bet that government stimulus coupled with near-zero interest rates will boost demand, they will generate inflation and further weaken the US dollar as the economy recovers from the pandemic.
The Bloomberg Commodity Spot Index, which tracks the price movements of 23 commodities, rose 1.6% on Monday to its highest level since March 2013. The indicator has already risen more than 60% since hitting a low of four. years in March 2020.
The gains benefited from copper, which topped $ 9,000 per metric ton for the first time in nine years, before extending gains further Tuesday. Oil also rose to its highest level in more than a year on speculation that global supplies are shrinking rapidly, while coffee and sugar also rose.
“People who have really ignored commodities for a long time are now starting to position themselves,” said Bart Melek, head of commodity strategy at TD Securities. “The implication is that this could go on for a while. It is largely an equation of expectations of scarcity. “
The Bloomberg Commodity Spot Index has risen by two-thirds since falling to a four-year low in March.
JPMorgan Chase & Co. said earlier this month that commodities appear to have started a new supercycle, an extended period during which prices are well above their long-term trend. That echoes other similar comments, such as those by Goldman Sachs Group Inc. Commodities have seen four comparable cycles in the last 100 years.
The asset class is generally considered a good hedge against inflation, which has recently become a concern for investors.
Commodities may rise as an unintended consequence of the fight against climate change, which threatens to restrict oil supplies while increasing demand for the metals needed to build renewable energy infrastructure and make batteries and electric vehicles, they said on 10 May. February JPMorgan analysts led by Marko Kolanovic.