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Time To Consider Commodities After A Difficult Decade

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  • 2019 could mark the start of a new trend.
  • Gold is bouncing back.
  • Oil's supply & demand balance may stabilize.
  • Do not forget about copper.
  • Agricultural commodities could stage a recovery.

By Nitesh Shah, Director of Research, WisdomTree Europe & Aneeka Gupta, Associate Director, Research

Any investor who has allocated to commodities over the last decade has experienced a difficult ride.


  • We've had blockbuster returns in the S&P 500 Index over the last 10 years, at more than 13% per year.
  • High-quality U.S. fixed income, as seen in the Bloomberg Barclays U.S. Aggregate Index, generated returns of approximately 3.5% per year, even with historically low interest rates.

In contrast, the Thomson Reuters Equal Weight Commodity Total Return Index, after keeping pace with U.S. equities from the start of the period through the halfway market in 2011, produced a steady decline into negative territory, losing 2.26% per year.

After such a difficult decade, with equities and fixed income doing well, and commodities steadily losing money, we'd imagine that many investors might be wondering why they should have commodities in their portfolios at all.

Figure 1: A Decade in Which Core Assets Have Performed but Commodities Have Not

2019 Could Mark the Start of a New Trend

Despite this pain, we're broadly constructive on commodities in 2019. Here's why.

Gold is Bouncing Back

We are already witnessing a gold recovery as investors rediscover the virtues of its defensive traits. A wobble in equity markets at the end of 2018 reminded investors that hedging portfolios is valuable. That drove positioning in gold futures markets from negative to positive. With geopolitical risks lingering in 2019, we expect gold to remain in favor. Silver, which has a close correlation to gold, is likely to gain a tailwind as well.

Oil's Supply & Demand Balance May Stabilize

After sanctions against Iran, implemented by the Trump administration, turned out to be not as harsh as markets expected, oil was in oversupply toward the end of 2018. However, OPEC has committed to cut

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