Gold and lithium have been the best commodities to invest in right now. As we head into the second half of 2023, it’s the perfect time to reflect on their accomplishments. The first half results of the commodity markets have been released. Interestingly, lithium and gold are the few commodities with positive returns in the first half of 2023.
Lithium: Fuel for the Electric Vehicle Boom
Lithium, a lightweight metal essential for battery production, is up 10.81% in the first half of the year. The rapid rise in lithium prices is driven by the exponentially growing demand for lithium-ion batteries. The International Energy Agency (IEA) predicts that global EV sales will increase by 35% from 2022, reaching nearly 14 million units in 2023. This would increase the global market share of electric vehicles to about 18%. As the world’s largest EV market and third-largest lithium supplier, China plays an important role in this growth. Last month, Tesla’s production in China increased by nearly 20%, leading to its highest quarterly sales ever.
Other automakers, such as Lamborghini, are also switching from internal combustion engines to electric or hybrid vehicles, amplifying the demand for lithium. The Italian automaker plans to allocate at least €1.8 billion ($2 billion) to hybrid product development through 2024, and aims to launch its first all-electric model by the end of the decade.
Gold: a reliable haven in times of economic upheaval
Gold, another commodity with positive returns, is up 4.93% in the first half of 2023. Gold’s value is underpinned by its stability. The US dollar has strengthened due to continued central bank demand and its role as a diversified investment vehicle, especially during the mini-financial crisis in March.
Expectations of an end to the Federal Reserve’s tightening cycle and the possibility of a mild recession in the US also supported gold’s strength. The World Gold Council (WGC) expects gold prices to continue their upward trend in the second half of 2023 due to factors such as India’s economic strength, potential stimulus from China, and continued hedging strategies.
Is a recession looming?
The global manufacturing PMI fell to 48.8 in June from 49.6 in May, marking the 10th consecutive month of contraction. This drop in new orders and rising pessimism has led to a decline in factory production, affecting key regions such as the US, Eurozone, Canada, and Japan.
This slowdown was reflected in the performance of other commodities. Agricultural commodities are down 5.77%, industrial metals are down 9.55%, and energy commodities, including oil and natural gas, are down 11.56%. Do you know which distressed stocks the top hedge funds and institutional investors are currently investing in? Click hereto find out.
Going Green
Global oil demand is expected to plateau and then decline over the next decade, according to a new report from BP. This trend is largely driven by increased vehicle efficiency and the adoption of alternative energy sources. Emerging economies are expected to maintain or slightly increase their oil consumption in the first half of the projection period, which contrasts sharply with the sharp decline in oil demand in industrialized countries.
