Connect with us

Real Assets

2022’s Stores of Value: Gold, Oil and Grains

Published

on

line chart of 2022 price performance of crude oil, gold, grains, the S&P 500, and bitcoin

Gold, Oil and Grains Emerge as 2022’s Stores of Value

2022 started off with a slump for equity and cryptocurrency prices, but real assets like gold, crude oil, and agricultural commodities have more than held their dollar value.

Even before Russia’s invasion of Ukraine resulted in extreme uncertainty over energy and raw material exports from both nations, commodities had already started to outperform other assets.

This graphic looks at how five key assets have performed in 2022 thus far, comparing the prices of WTI crude oil, the Invesco DB Agriculture Fund, gold, the S&P 500, and bitcoin.

Commodities Surge to Start off 2022

Just a few months into 2022 and commodities have already surged by double digits while nearly every other asset class has struggled to hold its value. Equity indices have continued to slide downwards from their all-time highs set in January of this year, with the S&P 500 down 13.4% from its all-time high.

Although the Energy sector of the S&P 500 is up 33.4% and the Information Technology sector is down 18.9% YTD, tech makes up more than a quarter of the index at 28.1% while Energy only makes up 3.7%. Other speculative tech assets like bitcoin and other cryptocurrencies have also significantly drawn down in 2022, with bitcoin down 16.3% and the total crypto sector’s market cap down by 22.4%.

Asset2021 Performance2022 Performance YTD
WTI Crude Oil+56.4%+34.4%
Invesco DB Agriculture Fund+22.4%+10.4%
Gold-3.6%+6.7%
S&P 500+26.9%-12.4%
Bitcoin+59.4%-16.3%

Source: TradingView
Prices as of March 14, 2022

In the meantime, commodity investors have seen record-breaking rallies and volatility, especially in the energy and agricultural sectors. Crude oil is already up 34.4% in 2022 after WTI Crude reached highs of $129 a barrel, and the Invesco DB Agriculture fund which tracks wheat, corn, soybeans, and other agricultural commodities is up 10.4% YTD.

Gold Recovers 2021’s Losses as Rate Hike Looms

While 2021 saw metals and energy prices surge, precious metals like gold and silver lagged behind the pack with negative returns. However, the Fed’s suggestion of raising interest rates has seen investors move out of speculative growth assets and into gold which has historically outperformed other assets in tightening cycles.

Russia’s invasion of Ukraine has also spurred investors towards gold in a flight to safety, with the yellow metal’s price rallying by more than six percent in February, the month of the invasion.

As Russia is cut off and cuts itself off from trade with the U.S. and other Western countries, a new trade system with China that primarily uses gold-backed settlement akin to the petroyuan could push gold prices even higher.

Sanctions and Supply Shocks Fuel Crude Oil and Wheat Rallies

Not long after the U.S. announced sanctions against Russia alongside the European Union and G7 nations, Russia immediately responded with comprehensive export bans against 48 different countries including the U.S. and the EU.

Currently, Russia is one of the biggest crude oil exporters in the world and exported around 4.7 million barrels of crude oil a day for a total export value of $110 billion in 2021.

Agriculture and specifically wheat prices have also surged as the invasion began, as both Russia and Ukraine are two of the world’s biggest wheat exporters. As a result of the uncertainty around these vital agricultural exports, wheat prices have skyrocketed nearly 40% over the past two months, and Russia has added fuel to the fire with a temporary grain export ban against ex-Soviet nations.

While the start of 2022 has seen a sizable shift in value towards commodities, we’ll see if these prices stabilize while stocks and crypto recover, or if this year is the beginning of a new commodity supercycle.

Click for Comments

Real Assets

Charted: The Value Gap Between the Gold Price and Gold Miners

While gold prices hit all-time highs, gold mining stocks have lagged far behind.

Published

on

Line chart comparing gold price and gold mining stocks since 2000.

Gold Price vs. Gold Mining Stocks

This was originally posted on our Voronoi app. Download the app for free on Apple or Android and discover incredible data-driven charts from a variety of trusted sources.

Although the price of gold has reached new record highs in 2024, gold miners are still far from their 2011 peaks.

In this graphic, we illustrate the evolution of gold prices since 2000 compared to the NYSE Arca Gold BUGS Index (HUI), which consists of the largest and most widely held public gold production companies. The data was compiled by Incrementum AG.

Mining Stocks Lag Far Behind

In April 2024, gold reached a new record high as Federal Reserve Chair Jerome Powell signaled policymakers may delay interest rate cuts until clearer signs of declining inflation materialize.

Additionally, with elections occurring in more than 60 countries in 2024 and ongoing conflicts in Ukraine and Gaza, central banks are continuing to buy gold to strengthen their reserves, creating momentum for the metal.

Traditionally known as a hedge against inflation and a safe haven during times of political and economic uncertainty, gold has climbed over 11% so far this year.

According to Business Insider, gold miners experienced their best performance in a year in March 2024. During that month, the gold mining sector outperformed all other U.S. industries, surpassing even the performance of semiconductor stocks.

Still, physical gold has outperformed shares of gold-mining companies over the past three years by one of the largest margins in decades.

YearGold PriceNYSE Arca Gold BUGS Index (HUI)
2023$2,062.92$243.31
2022$1,824.32$229.75
2021$1,828.60$258.87
2020$1,895.10$299.64
2019$1,523.00$241.94
2018$1,281.65$160.58
2017$1,296.50$192.31
2016$1,151.70$182.31
2015$1,060.20$111.18
2014$1,199.25$164.03
2013$1,201.50$197.70
2012$1,664.00$444.22
2011$1,574.50$498.73
2010$1,410.25$573.32
2009$1,104.00$429.91
2008$865.00$302.41
2007$836.50$409.37
2006$635.70$338.24
2005$513.00$276.90
2004$438.00$215.33
2003$417.25$242.93
2002$342.75$145.12
2001$276.50$65.20
2000$272.65$40.97

Among the largest companies on the NYSE Arca Gold BUGS Index, Colorado-based Newmont has experienced a 24% drop in its share price over the past year. Similarly, Canadian Barrick Gold also saw a decline of 6.5% over the past 12 months.

Continue Reading

Real Assets

200 Years of Global Gold Production, by Country

Global gold production has grown exponentially since the 1800s, with 86% of all above-ground gold mined in the last 200 years.

Published

on

global gold production

Visualizing Global Gold Production Over 200 Years

Although the practice of gold mining has been around for thousands of years, it’s estimated that roughly 86% of all above-ground gold was extracted in the last 200 years.

With modern mining techniques making large-scale production possible, global gold production has grown exponentially since the 1800s.

The above infographic uses data from Our World in Data to visualize global gold production by country from 1820 to 2022, showing how gold mining has evolved to become increasingly global over time.

A Brief History of Gold Mining

The best-known gold rush in modern history occurred in California in 1848, when James Marshall discovered gold in Sacramento Valley. As word spread, thousands of migrants flocked to California in search of gold, and by 1855, miners had extracted around $2 billion worth of gold.

The United States, Australia, and Russia were (interchangeably) the three largest gold producers until the 1890s. Then, South Africa took the helm thanks to the massive discovery in the Witwatersrand Basin, now regarded today as one of the world’s greatest ever goldfields.

South Africa’s annual gold production peaked in 1970 at 1,002 tonnes—by far the largest amount of gold produced by any country in a year.

With the price of gold rising since the 1980s, global gold production has become increasingly widespread. By 2007, China was the world’s largest gold-producing nation, and today a significant quantity of gold is being mined in over 40 countries.

The Top Gold-Producing Countries in 2022

Around 31% of the world’s gold production in 2022 came from three countries—China, Russia, and Australia, with each producing over 300 tonnes of the precious metal.

RankCountry2022E Gold Production, tonnes% of Total
#1🇨🇳 China33011%
#2🇷🇺 Russia32010%
#3🇦🇺 Australia32010%
#4🇨🇦 Canada2207%
#5🇺🇸 United States1705%
#6🇲🇽 Mexico1204%
#7🇰🇿 Kazakhstan1204%
#8🇿🇦 South Africa1104%
#9🇵🇪 Peru1003%
#10🇺🇿 Uzbekistan1003%
#11🇬🇭 Ghana903%
#12🇮🇩 Indonesia702%
-🌍 Rest of the World1,03033%
-World Total3,100100%

North American countries Canada, the U.S., and Mexico round out the top six gold producers, collectively making up 16% of the global total. The state of Nevada alone accounted for 72% of U.S. production, hosting the world’s largest gold mining complex (including six mines) owned by Nevada Gold Mines.

Meanwhile, South Africa produced 110 tonnes of gold in 2022, down by 74% relative to its output of 430 tonnes in 2000. This long-term decline is the result of mine closures, maturing assets, and industrial conflict, according to the World Gold Council.

Interestingly, two smaller gold producers on the list, Uzbekistan and Indonesia, host the second and third-largest gold mining operations in the world, respectively.

The Outlook for Global Gold Production

As of April 25, gold prices were hovering around the $2,000 per ounce mark and nearing all-time highs. For mining companies, higher gold prices can mean more profits per ounce if costs remain unaffected.

According to the World Gold Council, mined gold production is expected to increase in 2023 and could surpass the record set in 2018 (3,300 tonnes), led by the expansion of existing projects in North America. The chances of record mine output could be higher if gold prices continue to increase.

Continue Reading

Subscribe

Popular