SPECIAL REPORT
another great year for precious metals. Meanwhile, base metals also had a great run in 2020. Nickel (up 19%) outperformed the S&P 500. Copper (26%) outperformed gold. And iron ore (70%) outperformed them all. As with most commodities, China is driving the bus here. The growing giant consumes about half of all the world’s commodities annually. After being the first country to enter a lockdown due to COVID-19, it reopened its economy with a vengeance. At the same time, supplies were constrained due to pandemic-related mine shutdowns. But the fundamentals remain strong for base metals, going into 2021. Even if prices flatten out, miners can make money at these levels. Farmers received some long-needed tailwinds in 2020. Soft commodities such as corn, wheat, and soybeans were up 25%, 15%, and 39%, respectively, on the year. All of them are now trading at prices not seen since 2014. Food-supply chains broke down in the wake of the pandemic... Countries are now rethinking how and where they get their food. This will open up new opportunities in the sector moving forward. The oil and gas sector was crushed in 2020. Things were already bad in late 2019, as several majors took multibillion-dollar write-downs. At the start of 2020, OPEC+ engaged in a price war by flooding the world markets with oil. Weeks later, demand slowed dramatically as the world locked down due to COVID-19. According to oil-bankruptcy firm Haynes and
Boone, 46 North American producers filed for bankruptcy in 2020. Investors have all but abandoned the sector... And that has us excited. Recent production cuts by OPEC+ has oil prices back above $50 per barrel – a level where producers can make money. The return of normal demand has been agonizingly slow, but a bottom appears to be drawing near. This sector may turn out to be the best trade of 2021. Overall, commodity investors have plenty to be optimistic about in 2021. As a new presidential admin- istration takes control, these irresponsible monetary poli- cies will continue – as will the dilution of the value of the dollar.
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American Consequences
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