Commodities entering new supercycle, says new research

Commodities trading is expected to surge in the next 12 months as a new ‘supercycle’ takes effect, according to research from blockchain-based derivatives trading platform CloseCross.

On Monday, the platform said its research among professional investors responsible for around US$380bn in assets under management (AUM) showed that 84% expected the level of trading in commodities to increase in the year ahead, with 29% forecasting a substantial increase.

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A key driver of this expectation was the start of a new commodities supercycle, which 81% of investors said was already beginning and could see commodities trade above their long-term price trend for decades-long periods.

The professional investors highlighted that the key reason behind their prediction was a boom in government spending across the world as national economies recovered from the coronavirus pandemic.

Around 80% of investors included in the research highlighted the increase in state spending, while 77% pointed to the “greening” of the global economy as another positive factor.

Meanwhile, 61% believed strong demand from China was fuelling the new supercycle, while 53% cited the weakness of the US dollar and 29% pointed to low interest rates.

In terms of specific commodities, the research showed around 32% of professional investors believe industrial metals will see the biggest price increases in the year ahead, while 27% said precious metals will be the biggest winners.

Oil was among the least popular, with only 22% of investors expecting large price rises, while natural gas and agriculture were even less popular at 13% and 7% respectively.

“Commodities trading is set to surge over the next 12 months and the predictions of a commodity supercycle are driving increasing interest in markets”, CloseCross chief executive Vaibhav Kadikar said in a statement.

“Professional investors are split over which commodities will see the biggest price rises over the year ahead and it could also be difficult for retail investors to forecast the sectors likely to benefit. At CloseCross we will be providing the retail traders contracts on both Gold and Silver, which will undoubtedly see interesting trades”, the CEO added.