The periodic table of commodity returns (2022 edition)
For investors, 2021 was a year in which nearly all asset classes ended in the green, with commodities offering some of the best returns.
The S&P Goldman Sachs Commodity Index (GSCI) was the third best performing asset class in 2021, yielding 37.1% and ahead of real estate and all major stock indices.
This chart from US Global Investors tracks individual commodity returns over the past decade, ranking them based on their individual performance each year.
Rise in commodity prices in 2021
After a solid performance in commodities (metals in particular) the previous year, 2021 was entirely devoted to energy commodities.
The top three performing commodities for 2021 were energy fuels, with coal providing the best annual yield of any commodity over the past 10 years at 160.6%. Coal was also the least volatile commodity of 2021, according to US Global Investors, meaning investors were able to move smoothly as the price of fossil fuels rose.
Source: US Global Investors
The only commodities in the red this year have been precious metals, which failed to stay positive despite rising inflation in the prices of goods and assets. Gold and silver returned -3.6% and -11.7% respectively, platinum -9.6% and palladium, the worst performing commodity of 2021, at -22, 2%.
Precious metals aside, all other commodities generated positive double-digit returns, with four commodities (crude oil, coal, aluminum and wheat) showing their best performances in a single year of the past decade.
Energy commodities outperform as the world reopens
The partial resumption of travel and the reopening of businesses in 2021 were powerful catalysts that fueled the rise in the prices of energy commodities.
After crude oil fell into negative prices in April 2020, black gold made a strong comeback in 2021 as it returned 55.01% while being the most volatile commodity of the year.
Natural gas prices also rose significantly (46.91%), with natural gas prices in the UK and Europe rising even more as supply constraints collided with soaring winter demand. .
Despite being the second worst performer of 2020 with the clean energy transition on the horizon, coal was the best commodity of 2021.
Strong demand for electricity has enabled coal to make a strong comeback, especially in China, which accounts for a third of global coal consumption.
Base metals trump precious metals
2021 was a tale of two metals, as precious metals and base metals had opposite returns.
Copper, nickel, zinc, aluminum and lead, all critical to the clean energy transition, maintained positive returns from last year as electric vehicle batteries and energy technologies renewable have caught the attention of investors.
Demand for these energetic metals is expected to continue in 2022, as Tesla has already signed a $ 1.5 billion deal for 75,000 tonnes of nickel with Talon Metals.
On the other end of the spectrum, precious metals simply sank like a rock last year.
Investors looked to stocks, real estate, and even cryptocurrencies to preserve and grow their investments, rather than gold (-3.64%) and silver (-11.72%). Platinum and palladium also lagged behind other commodities, returning only -9.64% and -22.21% respectively.
Cereals provide constant gains
In a year of outperformance and underperformance, grains maintained their balance sheet stable and recorded their fifth consecutive year of positive returns.
Corn and wheat both produced double-digit yields, with corn hitting eight-year highs and wheat hitting prices not seen in over nine years. Overall, these two grains followed the 2021 trend of rising food prices, with the Food and Agriculture Organization of the United Nations’ food price index peaking. in 10 years, increasing by 17.8% during the year.
As commodity, asset and consumer goods inflation rose in 2021, investors will now be keeping a close eye on a pullback in 2022. We’ll have to wait and see if the Fed’s plans to raise rates. and reduce asset purchases succeed in ensuring the stability of commodity prices.