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

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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.

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Energy Shift

What is the Cost of Europe’s Energy Crisis?

As European gas prices soar, countries are introducing policies to try and curb the energy crisis.

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What is the Cost of Europe’s Energy Crisis?

Europe is scrambling to cut its reliance on Russian fossil fuels.

As European gas prices soar eight times their 10-year average, countries are introducing policies to curb the impact of rising prices on households and businesses. These include everything from the cost of living subsidies to wholesale price regulation. Overall, funding for such initiatives has reached $276 billion as of August.

With the continent thrown into uncertainty, the above chart shows allocated funding by country in response to the energy crisis.

The Energy Crisis, In Numbers

Using data from Bruegel, the below table reflects spending on national policies, regulation, and subsidies in response to the energy crisis for select European countries between September 2021 and July 2022. All figures in U.S. dollars.

CountryAllocated Funding Percentage of GDPHousehold Energy Spending,
Average Percentage
🇩🇪 Germany$60.2B1.7%9.9%
🇮🇹 Italy$49.5B2.8%10.3%
🇫🇷 France$44.7B1.8%8.5%
🇬🇧 U.K.$37.9B1.4%11.3%
🇪🇸 Spain$27.3B2.3%8.9%
🇦🇹 Austria$9.1B2.3%8.9%
🇵🇱 Poland$7.6B1.3%12.9%
🇬🇷 Greece$6.8B3.7%9.9%
🇳🇱 Netherlands$6.2B0.7%8.6%
🇨🇿 Czech Republic$5.9B2.5%16.1%
🇧🇪 Belgium$4.1B0.8%8.2%
🇷🇴 Romania$3.8B1.6%12.5%
🇱🇹 Lithuania$2.0B3.6%10.0%
🇸🇪 Sweden$1.9B0.4%9.2%
🇫🇮 Finland$1.2B0.5%6.1%
🇸🇰 Slovakia$1.0B1.0%14.0%
🇮🇪 Ireland$1.0B0.2%9.2%
🇧🇬 Bulgaria$0.8B1.2%11.2%
🇱🇺 Luxembourg$0.8B1.1%n/a
🇭🇷 Croatia$0.6B1.1%14.3%
🇱🇻 Lativia$0.5B1.4%11.6%
🇩🇰 Denmark$0.5B0.1%8.2%
🇸🇮 Slovenia$0.3B0.5%10.4%
🇲🇹 Malta$0.2B1.4%n/a
🇪🇪 Estonia$0.2B0.8%10.9%
🇨🇾 Cyprus$0.1B0.7%n/a

Source: Bruegel, IMF. Euro and pound sterling exchange rates to U.S. dollar as of August 25, 2022.

Germany is spending over $60 billion to combat rising energy prices. Key measures include a $300 one-off energy allowance for workers, in addition to $147 million in funding for low-income families. Still, energy costs are forecasted to increase by an additional $500 this year for households.

In Italy, workers and pensioners will receive a $200 cost of living bonus. Additional measures, such as tax credits for industries with high energy usage were introduced, including a $800 million fund for the automotive sector.

With energy bills predicted to increase three-fold over the winter, households in the U.K. will receive a $477 subsidy in the winter to help cover electricity costs.

Meanwhile, many Eastern European countries—whose households spend a higher percentage of their income on energy costs— are spending more on the energy crisis as a percentage of GDP. Greece is spending the highest, at 3.7% of GDP.

Utility Bailouts

Energy crisis spending is also extending to massive utility bailouts.

Uniper, a German utility firm, received $15 billion in support, with the government acquiring a 30% stake in the company. It is one of the largest bailouts in the country’s history. Since the initial bailout, Uniper has requested an additional $4 billion in funding.

Not only that, Wien Energie, Austria’s largest energy company, received a €2 billion line of credit as electricity prices have skyrocketed.

Deepening Crisis

Is this the tip of the iceberg? To offset the impact of high gas prices, European ministers are discussing even more tools throughout September in response to a threatening energy crisis.

To reign in the impact of high gas prices on the price of power, European leaders are considering a price ceiling on Russian gas imports and temporary price caps on gas used for generating electricity, among others.

Price caps on renewables and nuclear were also suggested.

Given the depth of the situation, the chief executive of Shell said that the energy crisis in Europe would extend beyond this winter, if not for several years.

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Real Assets

The Inflation Factor: How Rising Food and Energy Prices Impact the Economy

From rising inflation to food insecurity, we show why energy price shocks have far-reaching effects on the global economy.

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How Rising Food and Energy Prices Impact the Economy

Since Russia’s invasion of Ukraine, the effects of energy supply disruptions are cascading across everything from food prices to electricity to consumer sentiment.

In response to soaring prices, many OECD countries are tapping into their strategic petroleum reserves. In fact, since March, the U.S. has sold a record one million barrels of oil per day from these reserves. This, among other factors, has led gasoline prices to fall more recently—yet deficits could follow into 2023, causing prices to increase.

With data from the World Bank, the above infographic charts energy shocks over the last half century and what this means for the global economy looking ahead.

Energy Price Shocks Since 1979

How does today’s energy price shock compare to previous spikes in real terms?

U.S.$/bbl EquivalentCrude OilNatural GasCoal
2022*$93$170$61
2008$127$100$46
1979$119$72$33

*2022 forecast

As the above table shows, the annual price of crude oil is forecasted to average $93 per barrel equivalent in 2022⁠. By comparison, during the 2008 and 1979 price shocks, crude oil averaged $127 and $119 per barrel, respectively.

What distinguishes the 2022 energy spike is that prices have soared across all fuels. Where price shocks were more or less isolated in the past, many countries such as Germany and the Netherlands are looking to coal to make up for oil supply disruptions. Meanwhile, European natural gas prices have hit record highs.

Food prices have also spiked. Driven by higher input costs across fuel, chemicals, and fertilizer, agriculture commodity prices are forecasted to rise 18% in 2022. Fertilizer prices alone could increase 70% in part due to Russia’s dominance of the global fertilizer market—exporting more than any country worldwide.

What are 3 Ripple Effects of Rising Energy Prices?

Oil feeds into nearly everything, from food to smartphones. In fact, the price of oil influences as much as 64% of food price movements.

How could energy and food shocks affect the world economy in the near future, and why is a lot riding on the price of oil?

1. Rising Global Inflation

In 2022, inflation became a global phenomenon—impacting 100% of advanced countries and 87% of emerging markets and developing economies analyzed by the World Bank.

Countries With Inflation Above Target201920202021Apr 2022
Emerging Markets and Developing Economies20%20%55%87%
Advanced Economies9%8%67%100%

Sample includes 31 emerging markets and developing economies and 12 advanced economies

By contrast, roughly two-thirds of advanced economies and just over half of emerging markets experienced inflation above target in 2021.

This has contributed to tighter monetary conditions. The table below shows how rising inflation in the U.S. has corresponded with interest rate hikes since the 1980s:

DateCore CPI at Beginning of CycleMagnitude of Rate Hikes
Over Course of Tightening Cycle
1979-819.3%9.0 p.p
1983-844.6%3.0 p.p
1986-893.6%4.0 p.p
1994-952.8%3.0 p.p
1999-002.0%1.75 p.p
2004-061.9%4.25 p.p.
2015-192.1%2.25 p.p
2022-236.4%2.75 p.p

2023 is an estimate based on market expectations of the level of the Fed Funds rate in mid-2023. U.S. Core CPI for 2023 based on latest data available.

In many cases, when the U.S. has rapidly tightened monetary policy in response to price pressures, emerging markets and developing economies have experienced financial crises amid higher borrowing costs.

2. Slower Global Growth

Energy price shocks could add greater headwinds to global growth prospects:

Global Growth Scenarios202120222023
Baseline5.7%2.9%3.0%
Including Fed tightening2.6%2.4%
Including Energy price spike2.2%1.6%
Including China COVID-192.1%1.5%

Together, price spikes, hawkish monetary policy, and COVID-19 lockdowns in China could negatively impact global growth.

3. Rising Food Insecurity and Social Unrest

Even before the energy price shock of 2022, global food insecurity was increasing due to COVID-19 and mounting inflationary pressures.

Number of People in Acute Food Insecurity20202021
Sub-Saharan Africa97M119M
Middle East and North Africa30M32M
South Asia16M29M
Latin America and the Caribbean12M13M

Sustained food shortages and high food prices could send millions into acute food insecurity.

In addition, high fuel and food prices are often correlated with mass protests, political violence, and riots. While Sri Lanka and Peru have already begun to see heightened riots, Turkey and Egypt are also at risk for social unrest as the cost of living accelerates and food insecurity worsens.

Global Challenges

Since World War II, oil price shocks have been a major constraint on economic growth. As the war in Ukraine continues, the outlook for today’s energy market is far from clear as a number of geopolitical factors could sway oil price movements and its corresponding effects.

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