The Periodic Table of Commodity Returns 2019

In 2019, every major asset class finished in the black.

And although the broad commodity market finished up 17.6% on the year, the performances of individual commodities were all over the map. For those familiar with the sector, that’s pretty much par for the course.

That said, the lack of an obvious correlation in commodity markets also makes for a thought-provoking and humbling exercise: comparing the annual returns of commodities against the data from the past decade.

A Decade of Commodities (2010-2019)

Today’s visualization comes to us from U.S. Global Investors, and it compares individual commodity returns between 2010 and 2019.

You can use the interactive tool on their website to toggle between various settings for the table of commodity returns, such as breaking them down by category (i.e. energy, precious metals, etc.), by best and worst performers, or by volatility over the time period.

Let’s dive into the data to see what trends we can uncover.

Palladium: The Best Commodity, Three Years Straight

In 2019, palladium finished as the best performing commodity for the third straight year — this time, with a 54.2% return.

You could have bought the precious metal for about $400/oz in early 2010, when it was a fraction of the price of either gold or platinum.

Nowadays, thanks to the metal’s ability to reduce harmful car emissions and an uncertain supply situation, palladium trades for above $2,000/oz — making it more expensive per ounce than both gold and platinum.

Oil and Gas: Opposite Ends of the Spectrum

As key energy commodities, oil and natural gas have an inherent connection to one another.

However, in 2019, the two commodities had completely diverging performances:

Crude oil prices gained 34.5% on the year, making it one of the best commodities for investors — meanwhile, natural gas went the opposite direction, dropping 25.5% on the year. This actually cements gas as the worst performing major commodity of the decade.

“That’s Gold, Jerry!”

Finally, it’s worth mentioning that gold and silver had a bounceback year.

Gold gained 18.3% to finish with the best return the yellow metal has seen in a decade. Silver followed suit with a similar story, rallying 15.2% over the calendar year.

Precious metals now sit at multi-year highs against an interesting economic and geopolitical backdrop to start 2020.

Where do you see the above commodities ending up on next year’s edition of the rankings?

The world has experienced a decade of growth fueled by record-low interest rates, a burgeoning money supply, and historic debt levels – but the good times only last so long.

As the global economy slows and eventually begins to retract, can precious metals offer a useful store of value to investors?

Part 1: The Start of a New Cycle

Today’s infographic comes to us from Endeavour Silver, and it outlines some key indicators that precede a coming gold-silver cycle in which exposure to hard assets may help to protect wealth.

Bankers Blowing Bubbles

Since 2008, central bankers around the world launched a historic market intervention by printing money and bailing out major banks. With cheap and abundant money, this strategy worked so well that it created a bull market in every sector — except for precious metals.

Stock markets, consumer lending, and property values surged. Meanwhile, the U.S. Federal Reserve’s assets ballooned, and so did corporate, government, and household debt. By 2018, total debt reached almost $250 trillion worldwide.

Currency vs. Precious Metals

The world awash in unprecedented amounts of currency, and these dollars chase a limited supply of goods. Historically speaking, it’s only a matter of time before the price of goods increases or inflates – eroding the purchasing power of every dollar.

Gold and silver are some of the only assets unaffected by inflation, retaining their value.

Gold and silver are money… everything else is credit.

– J.P. Morgan

The Perfect Story for a Gold-Silver Cycle?

Investors can use several indicators to gauge the beginning of the gold-silver cycle:

1. Gold/Silver Futures
   
   

   Most traders do not trade physical gold and silver, but paper contracts with the promise to buy at a future price. Every week, U.S. commodity exchanges publish the Commitment of Traders “COT” report. This report summarizes the positions (long/short) of traders for a particular commodity.

   Typically, speculators are long and commercial traders are short the price of gold and silver. However, when speculators and commercial traders positions reach near zero, there is usually a big upswing in the price of silver.

2. Gold-to-Silver Ratio Compression
   
   

   As the difference between gold and silver prices decreases (i.e. the compression of the ratio), history suggests silver prices can make big moves upwards in price. The gold-to-silver ratio compression is now at high levels and may eventually revert to its long-term average, which implies a strong movement in prices is imminent for silver.

3. Scarcity: Declining Silver Production
   
   

   Silver production has been declining despite its growing importance as a safe haven hedge, as well as its use in industrial applications and renewable technologies.

4. The Silver Exception
   
   

   Silver is not just for coins, bars, jewelry and the family silverware. It stands out from gold with its practical industrial uses which account for 56.1% of its annual consumption. Silver will continue to be a critical material in solar technology. While photovoltaics currently account for 8% of annual silver consumption, this is set to change with the dramatic increase in the use of solar technologies.

The Price of Gold and Silver

Forecasting the exact price of gold and silver is not a science, but there are clear signs that point to the direction their prices will head. The prices of gold and silver do not accurately reflect a world awash with cheap and easy money, but now may be their time to shine.

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