According to the annual Outlook 2018 report by ETF Securities, commodity sectors tended to reflect developments in technology.
“Agriculture made up the bulk of the commodity market in the 18th century, steel and coal during the subsequent industrial revolution, and oil and petroleum reigned supreme in the last century,” ETF Securities head of research and investment strategy James Butterfill said.
“We now stand at a tipping point for a new generation of commodities driven by intertwining technologies among the themes of energy efficiency, automation and climate change, which are likely to be central for demand.”
Because metals were used often in the production of batteries or technologies such as self-driving vehicles, lithium, cobalt, copper and silver will enjoy greater demand, the report said.
Mr Butterfill also pointed to the role of the “least familiar” of the new generation of commodities, the ‘rare earth elements’, for the future of numerous industries.
“Despite their unfamiliarity to most, this group has become integral to produce modern technologies across many industries including medicine, defence, transportation and energy generation, as well as linchpins of our daily lives such as electronics and mobile devices,” Mr Butterfill said.
“With a growing global middle class coupled with the rise of automation, a litany of materials you’d be hard pressed to pronounce (like yttrium and praseodymium) will continue to cement their central role in our modern standards of living.”
Silver would also be performing well next year, according to the report, thanks to “industrial demand from solar panel and vehicle manufacturers”.
ETF Securities expected prices for gold, as well as palladium and platinum, to experience little change over the course of the next year, given that the value of gold tended to weaken as interest rates rose.
“Higher nominal interest rates, a steeper yield curve and the resultant stronger US dollar are likely to be impediments for significant upside in the price of gold,” said ETF Securities director, commodities strategy Nitesh Shah.
“We expect the Fed to continue to tighten policy but we think the downside risks to gold prices are limited because real interest rates will remain depressed as inflation gains pace in the US.
“On balance we see little change in gold prices in the coming year.”
