Is a new supercycle beginning?
THE BIGGEST commodity story of 2020 was one of decline. As the coronavirus pandemic halted travel, oil prices fell off a cliff, then briefly went subterranean: in April a futures contract for West Texas Intermediate was worth less than nothing. Oil began clawing its way above $45 a barrel in November, supported by optimism about vaccines. For other commodities, however, 2020 was not all bad. Indeed the year may have marked the start of an extraordinary ascent.
In August gold passed $2,000 an ounce for the first time ever, as low interest rates made the precious metal more attractive. The value of other commodities rose, too, not just from the depths of virus-induced lockdowns in April but from the start of 2020, before the pandemic began (see chart). Commodity assets under management reached a record $640bn in December, estimates Citigroup, a bank, representing an annual gain of nearly a quarter. By January 11th even the oil-heavy S&P GSCI commodity index had reached the level of a year ago. The debate now is how quickly oil prices will recover, and how high other commodities may soar.