Commodities Outlook: Which Ones Should You Keep an Eye on?

Published May 25th, 2021 - 07:30 GMT
Commodities Outlook: Which Ones Should You Keep an Eye on?
Another key global commodity that could rise in value due to supply shortages is steel, which is a vital component for many different manufacturing companies. (Shutterstock)
Highlights
Weather conditions, the global economic situation, and shifting levels of demand all play a part in this, so what commodities are worth keeping an eye on in the near future?

Commodities investors need to take into account various factors when deciding which items are more likely to rise in value. Weather conditions, the global economic situation, and shifting levels of demand all play a part in this, so what commodities are worth keeping an eye on in the near future?

The potential coffee shortage

With close to two-thirds of Americans drinking at least one cup of coffee every day, according to a 2018 study by the National Coffee Association, this drink is in greater demand than ever before. Yet, some studies suggest that climate change could drastically reduce the amount of coffee that we drink, as the main coffee-growing areas suffer serious changes.

The biggest area of concern right now is Brazil. This giant South American country is the world’s biggest coffee producer, with over 200,000 coffee farms said to produce more than 2.7 metric tons of coffee every year. 2020 saw a record crop of 68 million bags harvested here.

A serious drought in Brazil and logistical problems in shipping coffee have threatened their production this year, though, leading to coffee futures in the New York market shooting up in recent months. Prices have already started to rise and it is feared that the global coffee deficit could reach over 10 million bags by the end of 2021.

Gold is in short supply due to rising demand levels

The key point to bear in mind with the price of gold is that it tends to rise in times of economic and political instability, as investors use it as a safe haven. This has seen the price of this precious metal rise steadily in the last couple of years, with some analysts predicting that it could see reach $2,000 per ounce. The US Mint couldn’t keep up with the demand for its gold and silver bullion coins in 2020 and the start of 2021, as sales rose by over 250%. Gold CFD futures can be bought at a spread of 2.8, according to INFINOX, which compares to 2.2 on silver futures and a 1.5 spread on a NASDAQ investment of this type. The use of leverage allows investors to make large investments without actually buying this commodity.

Steel prices have been rising

Another key global commodity that could rise in value due to supply shortages is steel, which is a vital component for many different manufacturing companies. This has been particularly notable in the European market, where prices have been rising due to a lack of material.

The same situation has been noted in the US, where unfulfilled orders are at their highest level in five years and inventories are as low as they have been in more than three years. This has led to companies in various industries running the risk of losing orders if they can’t get hold of the materials that they need.

Predicting what will happen to the prices of commodities has always been difficult, due to the number of factors involved. However, the wealth of information that we now find online about these shortages can help us to make a more informed decision on the subject.


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