And the winner for most volatile commodity this decade goes to…lithium

Commodity prices are always volatile, but in 2022 metal and mining markets reached new levels of turbulence, as the pandemic played out in China, inflation plagued the developed world and the Ukraine war upended global energy. 

US Global Investors, every year publishes what the San Antonio, Texas investment firm calls The Periodic Table of Commodities Returns.  

2022 was the second year in a row lithium was the best performing among the 15 commodities tracked by US Global Investors. The battery metal gained another 72.5% in 2022 following a stunning 442.8% jump the prior year. 

Investors in the sector over the last decade can be forgiven for feeling whiplashed. Surging demand from the electric vehicle and energy storage market accounts for lithium’s spectacular rise, but much of the volatility is also due to the size of the market. 

Despite breakneck growth lithium mine production is expected to reach just 915,000 tonnes, according to data from top producer Australia.  That compares to iron ore, where the seaborne trade alone is more than 1.3 billion tonnes.  

The table shows gold has been the least volatile commodity since 2012, a testament to the depth and liquidity in the market for the precious metal. But even gold is not an easy investment to call – last year the gap between the high and low for the year was over $400 an ounce.  

US Global Investors CEO and chief investment officer Frank Holmes points to a December report by Goldman Sachs where the investment bank’s analysts write that the setup for most commodities this year “is more bullish than at any point since [they] first highlighted the supercycle in October 2020.”

“Goldman forecasts that commodities, as measured by the S&P GSCI, will return 43% in 2023. That would mark the third straight year of gains, something the asset class hasn’t achieved since the period from 2002 to 2005.”

Click here for the interactive version and PDF of the table and here for Holmes’ Frank Talk blog posts.