Lithium and Gold Shine Bright: The Lone Stars in H1 2023 Commodities Performance

The dawn of H2 2023 provides us with the opportune moment to reflect on the half-year performance of the commodities market. According to our regularly updated Periodic Table of Commodities Returns, just two commodities yielded positive returns during the first half of the year: lithium and gold.

Lithium and Gold Shine Bright: The Lone Stars in H1 2023 Commodities Performance

Riding High on Lithium

In H1 2023, lithium carved out a 10.81% return, a performance that crowned it the best-performing commodity. It was also one of only two commodities to record a positive return during this period; the other was gold. Other commodities that we closely monitor witnessed a fall, triggered by a shrinking global manufacturing activity and an underwhelming economic revival in China, post three years of pandemic-induced lockdowns.

Lithium owes its commendable H1 performance to one key sector: batteries. This lightweight metal has been a top performer for two consecutive years—2021 and 2022—owing to its critical role in the burgeoning electric vehicle (EV) industry.

Q1 2023 EV sales hinted at a prosperous year for the sector, projecting a global sales figure of roughly 14 million vehicles. This potential increase of 35% from 2022 could elevate the global electric sales share to nearly 18%, as per the International Energy Agency (IEA).

Lithium and Gold Shine Bright: The Lone Stars in H1 2023 Commodities Performance

China, the third-largest lithium supplier globally after Australia and Chile, continues to dominate as the largest EV market. Its EV giant, Tesla, boosted production by nearly 20% in June, contributing to the company’s record-breaking quarterly sales. With 93,680 cars rolling out of Tesla’s Shanghai factory, the monthly production witnessed a substantial surge from the 78,906 units in June 2022 and 77,695 vehicles in May.

Several auto manufacturers are transitioning from internal combustion engines to electric or hybrid models, further amplifying lithium’s demand. Lamborghini, for instance, has committed to a 1.8 billion euros ($2 billion) investment to establish a hybrid lineup by 2024, with plans to launch a fully electric model by the decade’s end.

Gaining Ground with Gold

Gold also had a positive run in H1, charting a 4.93% rise and outpacing most other major assets. Its sustained performance was buttressed by a stable U.S. dollar and continued demand from central banks. Gold’s appeal as a portfolio diversifier also grew during the mini-banking crisis that unfolded in March.

With central banks likely nearing the end of their interest rate tightening cycle, the Federal Reserve is expected to raise rates possibly one more time. This is predicted considering the strong jobs numbers posted in June, with the market consensus hinting at a mild economic contraction in the U.S., accompanied by sluggish growth in other developed markets, once the Fed holds its position.

Given its robust H1 performance, gold is anticipated to receive further support in H2 from several factors. These include India’s strengthening economy, potential Chinese economic stimulus, and continued hedging strategies. Should the risk of recession persist, gold could gain more value due to increased demand for high-quality, liquid assets, according to the latest report by the World Gold Council (WGC).

Lithium and Gold Shine Bright: The Lone Stars in H1 2023 Commodities Performance

Downward Trend Across Most Commodities

The monthly Purchasing Manager’s Indices (PMIs) suggest that a recession may be looming, with the Global Manufacturing PMI declining for the tenth consecutive month to 48.8 in June from 49.6 in May. This dip reflects a reduction in factory output owing to fewer new orders and growing pessimism, affecting key regions such as the U.S., the eurozone, Canada, Japan, and others.

Commodity prices, which we believe are forward-looking economic indicators, primarily slumped in H1. Agriculture commodities dropped by 5.77%, industrial metals tumbled 9.55%, and energy commodities, including oil and natural gas, pulled back 11.56%. Only precious metals had a positive performance.

Lithium and Gold Shine Bright: The Lone Stars in H1 2023 Commodities Performance

Cyclical segments of the global economy, such as construction and manufacturing—which heavily rely on metals like iron ore and copper—are currently grappling with recessions in various regions. A slowdown in China’s property market, directly impacting demand for construction materials such as steel, aluminum, copper, and nickel, also contributed to the declines.

The downtrend in oil prices, despite output cuts by the Organization of Petroleum Exporting Countries (OPEC), is primarily due to weak energy consumption, particularly in Europe, and China’s increased reliance on coal production amid an energy crisis.

Futuristic Outlook

Global oil demand is projected to plateau over the next decade before declining, due to increasing vehicle efficiency and a shift towards alternative energy sources, as per a recent report by BP. It predicts that emerging economies will slightly increase or maintain their oil consumption in the first half of the forecast period. In contrast, developed nations will witness accelerated declines. Consequently, emerging economies are projected to increase their share of global oil demand from 55% in 2021 to roughly 70% by 2050.

The story of H1 2023 was undeniably shaped by lithium and gold—the only commodities to chart a positive trajectory—each driven by unique market trends: the booming EV market and global economic uncertainties, respectively. However, most commodities stumbled, undermined by a contracting global manufacturing sector and declining demand. Investors may want to maintain their focus on lithium and gold, while adopting a cautious stance towards other energy commodities as the world advances towards a more sustainable future.

By: Frank Holmes, CEO and Chief Investment Officer

Author:Com21.com,This article is an original creation by Com21.com. If you wish to repost or share, please include an attribution to the source and provide a link to the original article.Post Link:https://www.com21.com/lithium-and-gold-shine-bright-the-lone-stars-in-h1-2023-commodities-performance.html

Like (1)
Previous July 11, 2023 2:02 pm
Next July 12, 2023 2:07 pm

Related Posts

  • Gold as a Store of Value: Analyzing the Renewed Interest in the Precious Metal as a Currency

    In recent years, there has been a renewed interest in gold as a store of value and a means of exchange. This trend has been driven by a variety of factors, including geopolitical instability, monetary policy uncertainty, and concerns about the long-term viability of fiat currencies. As a result, many investors and individuals are turning to gold as a form of currency, leading some to declare that the world is hurtling back toward gold as money. One of the main drivers of the renewed interest in gold is the perception…

    February 22, 2023
    0
  • Navigating the Financial Landscape: How Commodities Lead the Way with RRG Analysis

    Introduction In the ever-evolving world of finance and investment, staying ahead of the curve is paramount. One of the tools that can assist investors in making informed decisions is the Relative Rotation Graphs (RRG). RRG is a dynamic way to visualize how various asset classes are changing relative to each other. In this blog post, we will delve into the RRG charts to identify trends, opportunities, and potential strategies for optimizing your investment portfolio. Asset Allocation RRG The first RRG we will explore is the Asset Allocation RRG, which evaluates…

    October 3, 2023
    0
  • Brewing the Future: Analyzing Coffee’s Recent Price Trends

    Introduction Coffee enthusiasts and commodity investors have been closely monitoring the coffee market over the past few months, as coffee prices have experienced a significant decline since June 2023. However, the recent market dynamics, including price consolidations and small rallies, have raised questions about whether coffee has reached a major low. In this blog post, we will analyze the current situation in the coffee market and explore the factors contributing to its recent volatility. Understanding the Recent Coffee Price Movement The coffee market has experienced a notable pattern in recent…

    October 18, 2023
    0
  • The Resilience of Beef Demand: Navigating Price Hikes and Cut Preferences in the Summer Grilling Season

    As the sweltering days of summer set in and the familiar scent of barbecued fare wafts through neighborhoods, the annual grilling season kicks off. This year, however, the sizzle on your grill might sound a bit different. With increasing beef prices, consumers are turning to secondary cuts such as brisket, skirt, hanger, and flank steaks to satisfy their cravings, saving pricier middle cuts for special occasions. Despite the changes in the cuts being grilled, one thing remains steady – the strong demand for meat. Taking the Lead in Summer Grilling…

    July 11, 2023
    0
  • Analyzing Central Banks’ Gold Accumulation and Its Implications for Individual Investors

    Introduction Central banks around the globe have been continuously increasing their gold holdings in recent years. This trend has raised questions about the reasons behind such decisions and whether individual investors should follow suit in investing in gold and other precious metals. In this article, we will analyze the factors driving central banks to accumulate gold and discuss investment strategies for individuals interested in the precious metals market. Diversification of reserves: One of the main reasons central banks increase their gold holdings is to diversify their foreign exchange reserves. By…

    April 18, 2023
    0
  • Gold Midyear Outlook: Interest Rates, Recession, and Risks Propel Gold Higher

    Articles From: State Street Global Advisors By: Maxwell Gold, CFA, George Milling-Stanley, Diego Andrade, Robin Tsui, CPA, CAIA, CA Heading into 2023, gold’s prospects looked positive despite muted performance in 2022 and a similar consensus sentiment among market participants. And gold has certainly shone brightly on an absolute and relative basis thus far in 2023: Year to date, gold posted a 7.61% return compared to 7.68% for global equities and 3.03% for global fixed income. Over the last 12 months, gold has outperformed both global equities and global fixed income…

    June 15, 2023
    0
  • Exploring the Latest Investment Opportunities in 2023: Stock Market, Precious Metals, Crude Oil and Commodities

    The investment market in 2023 is shaping up to be an exciting and dynamic one. As the global economy continues to recover from the impacts of the COVID-19 pandemic, investors are looking for new opportunities to grow their wealth. In this article, we will take a closer look at some of the latest investment markets and opportunities available in 2023, including the stock market, precious metals market, and the markets for crude oil and commodities. The stock market, as always, remains a popular choice for investors looking to grow their…

    January 20, 2023
    0
  • Gold is Flirting with Record Highs Again

    On 3rd May, gold very narrowly missed breaking its all-time high achieved in August 2020. As of this writing on 11th May, gold is holding its ground comfortably above the $2000/oz mark. Gold’s recent rally was triggered in November last year when markets began foreseeing a slowdown in inflation in 2023 and the US Federal Reserve (Fed) toning down its hawkish rhetoric. As a result, despite subsequent interest rate increases, 10-year Treasury yields have pulled back and dollar has depreciated – both tailwinds for gold. Additional support came from the…

    May 12, 2023
    0
  • Soybean Surge: Unpacking the Brightening Demand Picture

    Introduction The soybean market has been making headlines recently, and for good reason. With a combination of factors ranging from strong export sales to favorable domestic conditions, soybean prices are on the rise. In this blog post, we’ll delve into the key drivers behind this surge in demand for soybeans and what it means for both investors and the agricultural industry. Export Sales and Soybean Meal Prices One of the primary catalysts behind the recent soybean price surge is the strong support from export sales and soybean meal prices. Soybean…

    November 1, 2023
    0
  • From Tangible to Intangible: The Evolution and Decline of Specie Money

    In today’s volatile economic landscape, with inflation rates soaring, many are feeling the pinch as the value of the Federal Reserve notes continually deteriorates. An alarming illustration of this is the observation made by Dr. Thomas L. Hogan: what you could buy with a silver dollar in 1913 now requires approximately $31.00 in today’s unbacked dollars. However, there was a time when money held its value more firmly. This era was dominated by specie money. What Was Specie Money? Simply put, specie money refers to coins minted from gold, silver,…

    August 17, 2023
    0

Leave a Reply

Your email address will not be published. Required fields are marked *

Comments(1)

  • Money's avatar
    Com21.com July 12, 2023 1:47 pm

    A Tale of Two Commodities

    Against the broader backdrop of a sluggish commodities market, the performance of lithium and gold stands out as an anomaly. This divergence underlines the crucial role these commodities play in our rapidly changing world.

    The robust demand for lithium, spurred by the global shift towards electric vehicles and renewable energy sources, has turned it into a prized commodity. Battery manufacturers and automakers are vying for a share of the lithium supply chain, given the metal’s indispensability in battery technology. The skyrocketing demand for electric vehicles, fueled by green energy policies and increasing consumer consciousness, suggests a promising outlook for lithium.

    Meanwhile, gold, often considered a safe haven during turbulent times, has continued to shine amidst global uncertainties. With the looming threat of a potential economic contraction and the end of the interest rate tightening cycle, gold is likely to continue to serve as a vital diversification tool for investors seeking to hedge against risk.

    Looking Towards the Future

    While lithium and gold offer bright prospects, other commodities face more uncertain futures. As we transition towards cleaner, more sustainable energy sources, fossil fuels, particularly oil, are likely to face a downward trend. The BP report predicts that global oil demand will plateau in the coming decade before entering a decline, largely due to increased vehicle efficiency and alternative energy sources’ adoption.

    Despite the challenges ahead, opportunities still abound. Emerging economies are expected to slightly increase or maintain their oil consumption in the coming years, potentially offering investment avenues. However, these opportunities should be approached with caution, given the broader trend towards decarbonization and sustainability.

    The steep decline of industrial metals such as iron ore and copper, key indicators of the global economy’s cyclical portions like construction and manufacturing, paints a worrying picture. These sectors are currently grappling with recessions across various regions, indicative of the broader economic malaise.

    A Note to Investors

    As we move into the second half of 2023, investors need to keep a close eye on market trends and global developments. While lithium and gold have demonstrated strong performances, it’s crucial to remember that past performance doesn’t guarantee future returns. Therefore, staying informed and maintaining a diversified portfolio can help navigate the ever-changing landscapes of commodity markets.

    In summary, H1 2023 has been a tale of two commodities—lithium and gold—sailing through rough market waters to offer positive returns. Meanwhile, most commodities faced the storm of shrinking global demand and manufacturing. As we look to the future, it’s clear that sustainable and renewable sources will take center stage, reflecting the world’s urgent push for a greener tomorrow. As such, investors may want to keep a keen eye on lithium and gold while adopting a prudent approach towards energy commodities.