Commodities Outperform in 2021 Though Gold Loses Its Lustre

By Reuters
December 20, 2021 Updated: December 20, 2021

LONDON—Commodities outperformed other assets this year as a recovery from the pandemic boosted demand though gold’s poor showing dented investor appetite.

Heading into 2022, commodities, which often perform well late in economic cycles, are due to remain competitive with equities as global growth extends its upward trek, analysts said.

“We like both equities and commodities and we have an overweight view for both in 2022. It’s hard to say which one will do better,” said Koen Straetmans, senior multi-asset strategist with NN Investment Partners in the Netherlands, which had 298 billion euros ($336 billion) under management at end of September.

The S&P Goldman Sachs Commodity Index index has surged 35 percent this year, trumping the U.S. equity index S&P 500 for the first time in a decade.

The S&P 500 has gained 23 percent, the dollar index has added 7 percent while U.S. benchmark 10-year treasury bonds are down 3 percent.

In commodities, coffee has been a standout, rocketing 84 percent.

Benchmark U.S. crude oil has surged 40 percent, copper has added 21 percent while gold has fallen, sliding 5 percent, partly due to expectations of interest rate rises.

Gold is a top focus among general investors and its erosion after gaining 25 percent in 2020 has hit flows into investment vehicles.

U.S. exchange traded funds (ETFs) in commodities have seen net outflows of $5.5 billion this year after inflows of $41 billion in 2020, Morgan Stanley data showed.

Next year, as logistics disruptions ease, global commodity demand should be robust as industry catches up with restocking, but this may be offset by more plentiful supply of many raw materials.

“There will also be a number of macro headwinds, which should limit further upside for the commodities complex,” ING analysts said in a note.

($1 = 0.8872 euros)

By Eric Onstad