A crazy presidential election season in the US, a global pandemic and now La Nina starting it’s disruptive weather pattern has all contributed to a lot of chaos in commodities this year. Which is not a bad thing if you are looking to invest. If you’ve learned anything in Investing:101 it’s that volatility in a market signals a good time to invest.
Things might not look good now, but the next year could have some nice things in store for those that do decide to invest in commodities. Things like copper are already surging in price and iron ore needed for an increase in steel production are on the horizon.
In this article, we will go over what the commodities situation is looking like heading into the new year.
1 – End to trade wars?
Since it is increasingly likely that there will not be a winner in this trade war between the US and China, when this happens, then there will be a grand reopening of markets and a free flow of goods coming and going. Soybean profitability will rise when there are more markets available so looking towards agriculture will surely be a good idea.
Once these tariffs are removed and markets can start looking to other providers, there will be more movement in many commodities.
2 – A weak dollar and lots of spending
The US Federal Reserve has been printing money like crazy the last few years which has led to inflation. When it comes to commodities trading, it opens things up like turning on a faucet.
Since many commodities are priced in US dollars, this makes purchasing them in other currencies much cheaper. This doesn’t mean that the US economy will remain weak just because the dollar has less buying power. These are not tied to each other. It simply means that growth outside of the US will be strong and lead to some good profits if you invest soon.
3 – Pent up demand
Certain things like crude oil may not bounce back strong since there may continue to be people working from home long after the pandemic is over. After all, it has proven to be beneficial to both employers and employees so there is no reason for people to change back now.
But, since many people will still be working or getting back to work, there will be more products being bought and likely more construction coming back. This will increase demand for electronics components and things like steel for construction.
4 – Investments in infrastructure
With a Biden win as president, it should herald some major investing in infrastructure. He has already promised a major investment in creating an infrastructure for electric vehicles by adding a lot of charging stations. This requires a lot of copper so expect a surge in prices there in the new year.
There will also be a lot of road construction and in things like the power grid. These works will get people back to work and the economy booming once again which will feed the cycle of demand with it.
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