Commodities Notched Their Best Year Since 2009, Despite Precious Metals Weakness

Every year around this time, we update our always-popular Periodic Table of Commodities Returns. I invite you to compare the returns to previous years, download a PDF of the table and more by clicking here.

Commodities as a whole had their best year in over a decade, due in large part to inflation triggered by unprecedented global monetary and fiscal stimulus. The Bloomberg Commodity Spot Index ended 2021 with a gain of 27%, the biggest yearly jump since 2009, when the financial crisis similarly prompted governments and central banks to flood their economies with liquidity.

The best performing commodity component was energy, with natural gas up close to 47%, crude oil up 55% and Powder River Basin coal up an eye-popping 160%. Energy increased at double the rate as the second-best category, industrial metals. Aluminum led these materials with an increase of 42%, followed by zinc (up 31%), nickel (26%), copper (26%) and lead (18%).

COmponents of the S&P Goldman Sachs Commodity Index 2021

A Challenging Year For Precious Metals, Gold Greatly Undervalued

As expected, precious metals were the worst-performing category, down 8%. None of the constituents ended the year in positive territory. That includes gold, which was the best performer of the bunch with a loss of 3.6%, despite inflation at a decades-long high.

Platinum and palladium’s slump are easily explained. The two metals, as you may be aware, are used in the production of pollution-scrubbing catalytic converters in automobiles. However, carmakers were hampered by the global semiconductor chip shortage, which slowed the output of new vehicles and hurt platinum and palladium demand. Looking ahead, demand could take a more significant hit as electric vehicles (EVs), which do not need catalytic converters, enter the mainstream.