Commodities have surged out of the gate to begin 2018 on global economic strength and a weak U.S. dollar. Zinc reached 10-year highs in the first week of January, Palladium soared above $1,100 for the first time since 2001, and copper prices have reached the highest point since 2014. Gold has inched above the $1,320 mark for the first time since September 2017.
Oil and gas have also started the year hot. Oil rose above $64 on January 11 for the first time since June 2015. The Organization of Petroleum Exporting Countries (OPEC) will stretch a production cut to the end of 2018 which has stabilized prices. Ongoing strife in big Middle East producers like Iran and Saudi Arabia has also had an impact on the rally.
Some analysts are confident that the commodities boom has legs with aforementioned economic growth and a weak U.S. dollar pushing prices upward, alongside falling bond prices and high equity valuations. Investors that are confident this push will continue into 2018 should scoop up the United States Commodity Index (NYSE:USCI).
The fund has climbed 5.5% year over year as of early afternoon trading on January 11. The fund is weighted in futures contracts in copper, oil and gas, wheat, and other commodities.
In its Global Economic Prospects report released on January 9, the World Bank projected economic growth would reach 3.1% in 2018. However, the bank warned that this upswing will be short-lived and the global economy will slow in the coming years, especially developed economies. The bull run in commodities could be coming to an end sooner rather than later.