The Bloomberg Commodity Spot Index hit its highest level since 2012.
The weakening USD has boosted investors’ demand to buy precious metals.
The Bloomberg Commodity Spot Index, which tracks the price movements of 23 raw materials, rose 0.7% on May 3. This index is at its highest level since September 2012.
Evolution of the Bloomberg Commodity Spot Index over the years.
Oil, the largest share of commodities, rose after the European Union proposed easing travel restrictions, a move that could further boost the recovery in global fuel demand. . Meanwhile, the US dollar depreciated, encouraging investors to buy commodities quoted in greenback such as silver and gold.
The world could consume 100 million barrels of oil a day by the end of this year, marking a full recovery from the effects of Covid-19 over the past year, according to Enterprise Products Partners.
Hydrocarbon demand could reach an all-time high as early as 2022, said Tony Chovanec, Enterprise senior vice president of commodity fundamentals and risk assessment.
Prices for everything from copper to oil to wood have skyrocketed as the world’s largest economies recover from the pandemic, and the market is increasingly showing signs of undersupply. Construction and manufacturing both increased, cars began to fill the streets, more people ordered airline tickets as they were vaccinated. China is buying record amounts of corn and rising grain prices have hampered global trade flows.
Hedge funds have been increasingly bullish on commodity futures for the third straight week, according to data from Bloomberg.
Massive government spending and loose monetary policy fueled inflation fears, fueling the rally. Commodities are often seen by investors as an asset to hedge against inflation and a weakening USD.