Commodities offer great advantages when it comes to diversifying your portfolio, as they are less volatile than stocks and are more attractive to traders and investors. Find out how to invest in raw materials.
Commodity market in 2023
The year 2022 has been marked by three major conflicts: the effects caused by Covid-19, the war in Ukraine and inflation, all of which have kept most investors in expectation gold ira company. Hence, in 2023, the moments of opportunity offered by the financial markets must be taken advantage of and in this sense, investing in raw materials can be an alternative.
The commodity market is one of the oldest and also one of the most popular as it is used by investors to diversify their positions. With an average revaluation of 25% in the prices of raw materials during the first quarter of 2022, these become almost the only assets that manage to beat the high inflation figures.
Among the main advantages of raw materials for 2023, in addition to protecting the investor against inflation, are: being less volatile than stocks; they are an optimal way to diversify the portfolio in the long term and against unstable or bearish markets; serve as protection against rising prices and imbalances between supply and demand
Seven raw materials to invest in 2023
The current international scenario and the advantages offered by the commodity market mean that investing in them continues to be viable and potentially profitable. By 2023, the most popular raw materials include: oil, natural gas, gold, silver, wheat, nickel and corn.
Crude Oil (Brent)
Crude oil is considered one of the most popular commodities to trade in 2023, as it is highly volatile and provides directional moves that are highly prized by both day and swing traders. Five countries generate 48% of world crude oil production, which together with oil-producing organizations such as OPEC control their supply, agree to increase or reduce their production and likewise influence prices.
Global oil demand is estimated to increase by 2.4 million barrels per day by 2023 to reach 102 million, which places this figure slightly below the all-time high reached in 2019. This would be motivated by the gradual recovery of the Western economies and the reopening of China.
Oil has yielded significant returns in 2022 and the reference barrel of Brent in Europe has appreciated approximately 20 percent. Its good performance has been motivated, among other things, by the energy transition that caused a reduction in investment in the oil industry. Its price is currently very stabilized at around $79.26 USD and it is forecast for 2023 to be at $95.74 dollars.
Natural gas
Considered the energy of the future, natural gas is in great demand and is one of the most popular commodities for 2023. Natural gas is the fuel par excellence that operates in Europe under long-term contracts. Russia is considered one of the largest producers and distributors in the world, which is why the conflict in Ukraine has caused an increase in its demand, which has favored a price increase of over 120% since the start of the conflict.
The Russian gas deficit, since the sanctions imposed, has been mainly compensated by the increase in imports of liquefied natural gas (LNG) mainly from the United States. Data from the European Union show that the main gas supplier in the first half of 2022 was Norway, with 23% of supplies (around 50% of Europe’s domestic gas volumes).
Some studies consider that prices will remain high in the second half of 2023 due to the growing penetration of Europe in the world spot LNG market and that they could be four times higher. These are the reasons why the vast majority of the energy industry and markets consider it one of the best raw materials to invest in. Its price towards the end of December 2022 was around $6.62 USD.
Gold
Investment in precious metals has grown over time, with gold being one of the most demanded. According to studies, in 18 years gold has multiplied its price by 50, which confirms that it continues to be one of the most valuable metals. Given the current scenario marked by inflation and the conflict in Ukraine that has changed the course of the European economy, an increase in the price of gold is estimated for 2023.
Some advantages of the precious metal place it as one of the best commodities to invest in in 2023. Gold is one of the most popular and effective commodity investments in terms of volatility, also when it comes to diversifying investments and for investment strategies long-term. Gold is considered the refuge asset in times of great crisis and therefore the best asset to safeguard savings.
As for gold price forecasts for 2023, analysts at British firm Metal Focus expect the average to decline 10%, to a 4-year low of around $1,500 an ounce. Closing values for 2022 of around €1,693.76 an ounce, coupled with forecasts make gold a very popular commodity to invest in in 2023.
Silver
Although it is known that silver has a lower yield than gold and that, according to British Precious Metals, weak industrial demand weighs on the precious metal because its industrial uses represent more than 50% of demand; an average price of $20.18 USD is forecast in 2023. Some are more optimistic, positing the probability that silver prices will rise to $28.89 USD by the first quarter of 2023.
Like gold, according to Metal Focus, precious metals play an essential role in investors’ portfolios and silver should outperform the stock and bond markets as well. The price of silver at the end of 2022 was around €21.94 an ounce.
Silver offers advantages for trading, so it may be a good option to include it in the investment portfolio. Among its advantages is that it moves much faster than gold and is one of the assets that shows high volatility with wide movements that can be easily identified. For all these reasons, silver is considered one of the best raw materials to invest in 2023.
Wheat
Investment in agricultural products occupies an important place in the raw materials market. In the case of wheat, the conflict between Russia and Ukraine pushed the prices of the cereal to all-time highs. Similarly, although the conflict caused interruptions in exports to Europe, other opportunities opened up for emerging markets such as India with more competitive prices.
Wheat maintains profitable prices for 2023 due to bullish factors that occurred in mid-2022 such as: the drop of 10 million tons in the world stock, the reduction of the harvest in Ukraine and the decrease in European production to consequence of heat waves.
Wheat consumption is positioned for the third consecutive year above production and its demand is forecast to increase in the coming years due to its diversity of uses as a food source and its ease of growth compared to other cereals. With its price hovering at the end of 2022 at $757.25 USD, wheat is one of the best raw materials to invest in 2023.
Nickel
The world demand for nickel is dominated by China, a country that exceeds 50% of global consumption, the second largest consumer is the United States with 8.1% and Japan is in third place with 7.5%. Due to its uses, a boost in the growth of its demand is expected in the future and good prospects in the long term.
Nickel is one of the metals that has had the greatest price changes, maintaining sustained growth from $21,160 USD per ton to $23,050 USD at the end of the first half of 2022.
It is estimated that the price of nickel in the short term may be supported by the increase in the costs of ore and electricity, coupled with an Indonesian export tax. The price of nickel towards the end of December 2022 was around $28,420 USD, making it one of the best raw materials to invest towards the beginning of 2023 that can be taken advantage of by investors.
Maize
Maize is the most cultivated grain in the world and in nutritional terms the most competitive energy source. Its production had already grown in 2021, when it recovered significantly around the world. The participation by countries in the world supply of corn in 2022 was led by the United States, Brazil, Argentina, among others.
Some factors affect the increase in demand such as population growth and consumption preferences. World corn production in 2022/23 is expected to total 1,167 million tons, against 1,212 million the previous year, according to estimates by the Agricultural Market Information System (AMIS) and remain with upward support.