Commodities reaching new highs

Commodities prices surged to new highs as indications of economic recovery raised hopes of renewed energy demand and a lower dollar stoked investor appetite for precious metals.

The Bloomberg Commodity Spot Index, which follows price movements for 23 raw materials, increased 0.7% Monday. The index is at levels not witnessed after 2012.

Oil, the most profoundly weighted commodity in the group, rose after the European Union suggested easing travel restrictions, a move that could further support a rebound in fuel demand globally. Meantime, the dollar reversed, prompting buying of dollar-denominated commodities, including silver and gold.

As stated by Enterprise, the world could again be practicing 100 million barrels a day of crude oil by the top of 2021, which would be a complete restoration from the destructive impacts of stay-at-home orders and travel constraints over the past year.

Products Partner’s demand for hydrocarbons could touch all-time highs as soon as next year, Tony Chovanec, Enterprise’s senior vice president for fundamentals and commodity risk assessment, stated during a conference call with investors.

Prices for everything from copper to oil to timber have sky-rocketed as the world’s biggest economies improve from the epidemic, with increasing signs of shortages across markets.

Manufacturing and building are pulling up, cars are filling the streets again, and more people are scheduling airline tickets as they get vaccinated at a time when supplies are controlled by bottlenecks, production curbs, and poor weather. China is purchasing record amounts of corn, and pricier agricultural grains have upended global trade flows.

As stated in data collected by Bloomberg, hedge funds have raised bullish bets in commodity futures for three continuous weeks. Massive government spending and relaxed monetary policy have stoked inflation concerns, which have also fed the bull run. Investors typically see commodities as a hedge versus inflation and a lower dollar.