Weather conditions, supply chain issues, and political tensions have all continued to impact the price and availability of commodities. Here we take a look at what to expect from some of the top commodities in 2023.
Future Outlook
Commodities have long been a favourite when investors are striving to hedge against inflation and in the face of recession. Commodity trading, including gaining access to the gold market, is available through CFD trading platforms, where you can speculate on the price of precious metals. Gold is often also purchased as physical coins or bars.
As well as the challenging geopolitical situation, climate change will continue to impact the commodities markets this year significantly. Heatwaves and other catastrophic weather events are inevitable over the coming months and also need to be taken into account when making investment decisions. Some commodities worth keeping an eye on in 2023 include:
- copper
- cotton
- aluminum
- coffee
- iron ore
- lithium
- oats
Crude Oil
The Organization of the Petroleum Exporting Countries (OPEC+) has decided to reduce output until the end of 2023, which has already brought some stability to the market. A ban on seaborne crude oil came into effect on the 5th of December, and a refined products ban will go into effect on the 5th of February.
Between the continued ban on Russian crude oil and supply cuts, the oil market is set to tighten in 2023. However, investors should keep in mind that OPEC+ may decide to change the current policy. With the ongoing challenging geopolitical situation, the oil market is unlikely to return to a stable condition.
Gold
The current geopolitical climate has both a positive and negative impact on commodities. Gold historically remains relatively stable compared to other commodities, like oil and natural gas. Gold has recently climbed, as many consider the yellow metal a safety net for funds.
Although gold has long been used to hedge against inflation, it also struggles when interest rates rise. Predictions are that the US Federal Reserve will start to slow the rate at which interest rates are being increased, and the US dollar will revert in value in 2023.
Natural Gas
Regarding natural gas, Europe is feeling the brunt of price hikes and a lack of supply. That being said, the effects of the lack of natural gas supply are being felt globally. It is doubtful that the Russian gas supply to Europe will recover during 2023.
Predictions are that in the US, the outlook for natural gas is more optimistic, with storage set to reach its highest level in three years by 2023/24. For the foreseeable future, natural gas prices will remain raised.
Bullish Outlook
The outlook for most commodities next year is more bullish than it has been. For example, the need for copper continues to increase, with a high demand for EV batteries. Commodities are now more accessible than ever through easy-to-use trading platforms. 2023 has been forecast to be a year of continuing market volatility. However, it is still essential to understand the current global climate and develop an adequate strategy
