- Is the current commodity rally just another reflationary episode or something more pervasive?
- Recent market moves in commodities rank in the top 5% of six-month moves since 1971
- Gold's weak performance so far is consistent with previous reflationary episodes – its time to shine may yet come.
A commodity rally began in Q2 of 2020, sharply on the heels of the COVID-19-driven broad market sell-off. It started with metals, followed by energy, and, by the summer, agricultural commodities had joined in. Investors have waited more than a decade for this type of commodities rally but perhaps their patience is about to be rewarded. The recent market moves – between August 2020 and February 2021 – now rank in the top 5% of six-month moves since 1971 and, with a 30-year low as a base, this suggests they could have further to go (Charts 1 and 2).
Chart 1. A long wait for a strong run from a low base
S&P GSCI Commodity Total Return Index from January 1971 to February 2021*