The second half of 2022 has been abysmal for commodities as concerns about global economic growth, geopolitical tensions, and falling energy prices have weighed on the market. In the aggregate, commodities (as measured by Bloomberg’s BCOM Index) have fallen 15.73% since June 1st, overwhelmingly due to the dramatic decline in energy prices, which have been highly speculated on since Russia’s invasion of Ukraine. Interestingly, industrial metals have outperformed the aggregate commodities market even as a production-slowing recession in the US seems to be expected by most economists.
Digging further into the metals sub-sector, which often reflects investors’ sentiment, we see silver as the only metal with a positive six-month return and sibling precious metals, platinum and gold, with only (relatively) modest losses. Precious metals’ premium over industrial metals suggests uncertainty still dominates the commodities market as investors opt for traditional store of value commodities rather than the highly business cycle-dependent industrial metals.
Notably, the often-referred-to “Dr. Copper” also remains reflective of investors’ certainty of an economic slowdown, down 12.60% in the second half of 2022.