Russia’s invasion of Ukraine has already made its impact on the global economies. What appeared to be ‘transitory’ was finally acknowledged as being persistent and rising inflation got fuelled by the ongoing war in Ukraine. With oil reaching higher levels, the global commodities markets are witnessing huge upheaval amidst the destruction and the sanctions imposed on Russia. Jeff Currie, Goldman Sachs’ Global Head of Commodity Research is of the view this political shock as reinforcing the commodities supercycle.
After the US, the second largest commodity producer in the world is Russia, and the sanctions on Russia are expected to increasingly impact the global supply chains.
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Here’s how Currie sums up his views on global commodities and the impact on markets – “Firstly, commodities are not homogeneous. They’re not completely fungible. I think there is a belief that we can easily distribute this stuff all around the world. But you’re lengthening supply chains in an environment in which inventories are already low.
Secondly, I think the other important point about this decoupling or deglobalization is that we are creating a bifurcated commodity market with growing risks of a dislocation between western and eastern commodity prices.
Crucially, I would be watching that East-West bifurcation between oil prices and metal prices slowing down. The bottom line to all of this is that we view all this political shock as reinforcing the commodities supercycle.”
On the back of rising commodity prices, inflation may soon cut-loose unless tamed by the central bankers. Commodities exchange-traded funds (ETFs) could turn out to be the ETFs to watch in 2022.
List of Commodity ETFs
Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC)
WisdomTree Enhanced Commodity Strategy Fund (GCC)
Invesco DB Commodity Index Tracking Fund (DBC)
First Trust Global Tactical Commodity Strategy Fund (FTGC)
Global X Disruptive Materials ETF (DMAT)
iShares S&P GSCI Commodity-Indexed Trust (GSG)
Exchange Traded Fund is a financial security that tracks an index, a commodity or a sector like an index fund or a sectoral fund but trades like a share on the stock exchange. What’s more, in an ETF you get the live prices as trading happens all through the market hours and the cost of owning them is considerably low.