Commodity prices have been struggling in recent weeks, pausing this year’s remarkable run on materials stocks and raising the question of whether the opportunity for investors has ended.
But some observers remain convinced that a commodities “supercycle” – an extended period of strong demand for raw materials – is continuing, offering a buying opportunity for anyone who missed the first stage of the rally.
“Although most of the world continues to battle the COVID-19 pandemic, rapidly increasing vaccination rates combined with revved-up economic stimulus has significantly improved the outlook (and sentiment) for commodities,” Orest Wowkodaw, an analyst at Bank of Nova Scotia, said in a report this week.
The bullish take on commodities follows sharp gains this year, as the global economy recovers from last year’s lockdowns amid robust government spending and low interest rates.
The Bloomberg Commodities Index is up 20 per cent since the start of the year. Copper, one of the stars of the rally because of its importance to the technology that underpins renewable energy and electric vehicles, touched record highs in May.