2024 has been a year of uncertainty so far. Global geopolitics, a pending US Presidential Election, and shifting monetary policy are three reasons for much of the angst. Traders have had their hands full attempting to deal with the subsequent volatilities.
When it comes to risk assets, uncertainty is bad for business. The market meltdown of Monday, 5 August, is a prime example of this phenomenon. Epic pressure on the Japanese yen carry trade brought mass panic to the financial world and commodity companies. The CBOE volatility index (VIX) spiked to 65, levels not seen since the COVID outbreak. An equities selloff ensued in the Nikkei, DAX, and DJIA. The commodity market also experienced heavy selling pressure, but to a far lesser degree with the Bloomberg Commodity Index lost just nearly -3% since the beginning of the year.
Believe it or not, uncertainty can be good for commodities prices. If 2024’s market ambiguity continues, then now is the time to buy gold, wheat, and uranium.
3 Top Commodities to Buy Right Now
Here are 3 top commodities to look out for as of August 2024:
Gold: The Traditional Safe-Haven
A safe-haven asset is a product investors favor when the markets become chaotic. 2024 has reinforced bullion’s standing as the financial world’s ultimate safe-haven. The commodity prices have increased more than 19% since 1 January, establishing a sustained uptrend.
So, why has gold prices driven higher throughout this year? Two reasons: monetary policy and geopolitical uncertainty. Each item has factored into bullish bullion and brought bidders to the market in mass. Evidently, Gold’s prices gained slightly over 20% YTD, with SPDR Gold Trust, which is a commodity ETF that tracks gold’s price in the over-the-counter (OTC) market, gained over 18% YTD.
Currently, both of these market drivers are firmly in place. From the geopolitical side of the equation, the Russia/Ukraine and Israel/Hamas wars continue. In fact, many analysts predict significant escalations in the coming months. A Ukraine offensive into Russian territory and possible large-scale Iranian intervention in the Israel/Hamas war prompted global conflict angst.
On the monetary policy front, a dovish pivot from the world’s central banks has supported the bullish case for the precious metal. Rate cuts from the ECB, RBNZ, and BoE have set the stage for US Federal Funds Rate reductions. Generally, a larger money supply increases commodity pricing — the likely scenario from now through 2025.
Add it all up: wars and relaxed monetary policy make gold a commodity to buy right now.
The Bullish Case For Wheat
Active traders and investors often overlook agricultural commodities. However, they can be fantastic tools for diversification. Products such as corn, wheat, and soybeans offer market participants fantastic ways of allocating risk, and utilizing the commodity spread trading strategy.
Perhaps no market has been affected by the Russia/Ukraine War more than wheat. During the Russian invasion, wheat futures contracts spiked nearly 100% as traders priced the disruption of Ukrainian wheat from the world’s commodity markets. Ukraine accounts for between 5% and 6% of total global wheat exports. The threat of this supply coming offline sent prices skyrocketing from pre-invasion $7.50 per bushel north of $13.50 per bushel. Another major factor for wheat’s price increase is oil prices, which gained nearly 10% since the beginning of 2024.
Wheat has been on a steady downtrend since the initial stages of the Russia/Ukraine War. As of this writing, wheat is trading at nearly $5.50 per bushel, levels last seen in August 2020. From a technical standpoint, this is a fantastic area to buy the market.
The bullish case for wheat is both fundamental and technical. Fundamentally, any major escalations in the Russia/Ukraine War will send wheat higher. Technically, wheat is trading at multi-year lows — a fantastic place to bid the market right now.
Is It Time To Buy Uranium?
Without question, uranium is one of the largest “under the radar” commodities on the planet. Nonetheless, it is on many opportunistic traders’ watchlists.
Uranium is a radioactive element vital to the production of nuclear power. Its price is based on a collection of factors: supply/demand, governmental policies toward nuclear power, and speculators. In this way, uranium’s standing as an energy source makes it similar to fossil fuels.
The demand side of the uranium equation points to a potential long-term price rally. Why? The artificial intelligence (AI) boom. Currently, AI data processing accounts for roughly 2% of global electricity consumption; this is to double by 2026, a level equal to the resources used by Japan.
Analysts believe that AI’s electricity demands will place an enormous burden on electrical grids worldwide. Natural gas and hydroelectric power are being touted as two potential solutions, and so is nuclear power. Given the AI boom scenario, the demand for uranium will increase multifold.
From a technical point of view, 2024 uranium prices topped out in May. Coincidentally, May was a period when the markets aggressively began pricing the eventualities of a forthcoming AI boom. Now, uranium prices are off more than 25% after three down months in a row. To invest in Uranium, you can buy Uranium’s commodity futures, the commodity ETFs, or Uranium commodity stocks.
Is it time to buy? Yes. The long-term trend is up, with uranium holding onto 50% of the gains from 2023’s lows. Powered by the AI boom, relaxed monetary policy, and supply disruptions stemming from geopolitical angst, uranium is a solid bid from the $3,000 area.
The Bottom Line
Late 2024 has the potential to be a critical turning point for commodities. Assets such as crude oil, silver, natural gas, and some agriculturals have been held in check throughout the year. Is it time for a market-wide rally? Possibly.
However, entire asset classes rarely rally together. Policy issues, economic cycles, or weather can derail one product while enhancing another. That’s why most astute traders practice diversification — to make the most of their money.
Gold, wheat, and uranium offer traders and investors solid avenues to engage the commodities markets. Gold offers safe-haven protection for any investment portfolio; wheat is trading at attractive COVID-era lows, and the AI boom is poised to fuel uranium demand. Given the uncertainty surrounding the world’s financial system and the global economy, these are three commodity investments to make right now.
Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
