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Most Profitable Commodities For the Last Decade
Have a good look to this table. [View the Complete Interactive Table]
Natural resources are the building blocks of the world, essential to progress and prosperity. These commodities, like all investments, can have wide fluctuations over time. This table shows the ebb and flow of commodity prices over the past decade and illustrates the principal of mean reversion – the concept that returns eventually move back towards their mean or average. The price movement of commodities is historically both seasonal and cyclical. That’s why when investing in natural resources, we believe it’s important for your portfolio to hold a diversified basket of commodities and to be actively managed by professionals who understand these specialized assets and the global trends impacting them. As with all investments, diversification does not protect an investor from market risks and does not assure a profit, and of course, past performance does not guarantee future results.
There are many ways to analyze the data in the periodic table – I’ll share just a few basic observations.
- Of the 140 squares in the table (14 commodities times 10 years), 92 of them contain positive returns – that’s just under two-thirds success covering a range from the spectacular 320 percent up year for natural gas in 2000 down to the microscopic 0.02 percent gain by crude oil in 2006.
- Gold had the most positive years – its streak now stands at nine straight years after a 5.5 percent loss in 2000, when the bullion price dipped below $265, roughly a quarter of the current price. Oil, platinum and silver all had eight positive years during the decade, while nickel had six down years.
- Natural gas had the most extreme swings, finishing at #1 three times and at the bottom twice. One year after recording the biggest yearly gain in 2000, natural gas had the worst single-year loss – minus 74 percent.
- Aluminum and silver had the least relative volatility and the most years hovering around the middle. Even in their best performance year (2009), both were in the bottom half – silver at #8 and aluminum at #9.
The International Monetary Fund believes that commodity prices will rise further in 2010 as a result of global economic recovery and escalating demand from fast-growing emerging markets.
The expanding middle class in China, Brazil and the other biggest emerging economies want more of the material goods taken for granted in the developed world. They are laying claim to a bigger share of the world’s commodities, many of which could face future supply constraints.
History shows that commodity super-cycles typically last 20 to 25 years, though not without periods of volatility. If the current cycle follows the historic pattern, we could be just starting the second half of a prolonged upward trend.
