After moving downward at the end of 2018, many key commodities have seen their prices increase in the first half of 2019. Commodity prices tend to be volatile, but it’s been quite a surprise for many analysts that these assets are up, despite intense trade tensions between China and the United States.
The U.S. dollar is always a significant factor, as most commodities are priced in USD, and tend to be negatively correlated to the greenback, which means that they evolve in opposite directions. With investors hoping that the Fed will support American economic growth by cutting interest rates, the U.S. dollar isn’t as attractive as when interest rates were rising.
What are the best performing commodities so far this year?
#1 Iron Ore
Iron Ore was a big winner during the first half of the year, thanks to strong demand alongside supply disruption in Australia and Brazil. Expectations of higher demand from China should remain strong, as the country is launching even more infrastructure projects.
#2 WTI Oil
West Texas Intermediate Oil was also among the best-performing commodities during H1. While WTI started 2019 at less than $44 a barrel, it is now trading at about $57, with a peak of around $66 reached on April 23rd. OPEC and Russia are maintaining their production cuts to manage the market and are now in their third year of managing supply with the goal of pushing down high inventories, while supporting prices.
#3 Palladium
Investing in Palladium at the start of 2019 would have been a great decision, as the metal has experienced significant gains, especially since June. It is now more expensive than Gold, and demand from the automotive industry is getting stronger with the return of gasoline engines after the “Dieselgate” scandal. Palladium is used in the production of catalytic converters and analysts note that its price should keep going up, as mines are not producing enough Palladium to meet the growing demand from car makers.
Pro tip
The commodity markets can be quite volatile, so be ready for strong price movements, especially when important figures are released. Make sure you read brokers reviews, like this UFX review, and take full advantage of the tools available to private traders, such as the UFX news feed on their website and app. This is one of the easiest ways to monitor the economic calendar, so you know when events or statistics triggering volatility will be released and can adapt your trading parameters accordingly. Economic shocks, extreme weather, and supply disruptions caused by strikes, conflicts, or accidents can all impact the prices of major commodities.
