Commodities may finally be on the upswing.
The market has taken a beating over the last decade. After peaking in July of 2008, the Bloomberg Commodity Index BCOM has fallen almost 70%, dragged down by an oversupply of oil, a rising dollar, and flagging demand.
But some experts have suggested the so-called “commodity super-cycle” may have bottomed out.
That’s the bet that William Rhind, CEO of GraniteShares, made this month. GraniteShares, a New York-based ETF startup, unveiled its first two funds May 22, which both provide broad exposure to the commodities market.
“Consumption is there, these commodity indices are trading well below their historical mean, and it’s a cyclical business,” Rhind said.
Rhind, who previously worked at ETF giant iShares, said the combination of potential pro-inflation domestic policy in the U.S., rising global GDP, OPEC supply cuts, and a falling dollar could all spell good news for commodities.
The World Bank this month estimated a 24% increase in oil prices next year, driven by a 1.4% increase in consumption that could eliminate OPEC’s excess oil reserves. Prices could rise even higher if an OPEC production cut holds, or if further cuts are added. Political disruptions in oil-producing and transporting nations could also contribute to an increase in prices
Metals prices may also rise, thanks to an increase in demand in China and unexpected supply constraints. The rise could amount to as much as 16%, the World Bank noted.
A falling dollar could also boost commodities sales by making commodities cheaper, as almost all commodities are priced in dollars. The dollar has fallen 5% since the start of the year compared to a basket of major currencies, and President Trump has signaled his desire for it to go lower – though his ability to influence the price of the currency is limited.