Commodities to see meagre long-term returns - Capital Economics
17.02.2021, 12:27

Commodities to see meagre long-term returns - Capital Economics

FXStreet reports that economists at Capital Economics expect relatively poor returns from most commodities over the next three decades. In the cases of both energy commodities and precious metals, returns are expected to be negative.

“The ongoing transition towards clean energy means that growth in oil demand will be weak over the coming decade, and that global consumption will peak in 2030. Accordingly, we think that oil prices will struggle to make meaningful gains in nominal terms over the coming decades and will fall quite sharply in real terms.”

“Over the next decade we anticipate a sharp economic slowdown in China, which accounts for roughly half of global demand for the major base metals. Our view is that it will probably take until at least 2030 for the green revolution to provide enough of a boost to demand for industrial metals to offset the impact of weaker growth in China. And even beyond 2030, we expect the returns from GSCI Industrial Metals Index to be middling, rather than stellar.”

“The outlook for precious metals is quite poor. Their returns tend to be quite closely correlated with those from other safe assets, such as US Treasuries and TIPS. Our forecast that the 10-year TIPS yield will gradually rise to 1.5% by the end of 2050 – from around minus 1% at present – is consistent with a fairly sharp drop in the price of gold. Largely for this reason, we anticipate negative average annual returns from the GSCI Precious Metals Index.”

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