⛏️ Striking gold or striking out?

A Deep Dive into Commodities in the Global Economy and Investment Landscape

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Jan 15, 2025

Commodities 101
How are Gulf countries fostering technological development?
TikTok refugees are flocking to RedNote—what is this app?

In our recent discussion, we wrapped up with a comprehensive analysis of 2024’s global asset performances. Today, let's delve into the world of commodities and explore their critical role in the global economy and investment portfolios!

📈 Why are commodities important?

Economic Foundation: Commodities like oil, natural gas, and copper are crucial for industrial production and infrastructure, serving as the backbone of global economic activities.
Inflation Hedge: Commodities often rise with inflation, making them essential for protecting investments. Gold, for instance, is a favoured asset during inflationary periods.
Portfolio Diversification: With their low correlation to stocks and bonds (also why they make for a great hedge), commodities can stabilise investment portfolios during market volatility.
Price Changes have a Global Impact: Fluctuations in commodity prices can affect everything from corporate expenses to national trade balances, influencing economic stability.
Geopolitical Barometer: Commodities react sensitively to geopolitical changes, making them effective tools when it comes to politics and trade wars.

🧬 How can you get involved?

The commodities market refers to financial instruments derived from physical commodities, including futures and options. This means you’ll often hear the phrase commodity derivatives.

These derivatives allow investors and speculators to engage with the value of a commodity like gold, copper, or oil without holding the physical asset itself.

This approach simplifies transactions and makes it easier to get involved. Just because you believe the price of gold will increase, or you are worried about political uncertainty eroding your dollars or pounds, doesn’t mean you need to stockpile bullions of gold in your shed!

Most investment platforms will offer different ways to interact with commodities, all with their own risks and rewards, we’ll have to cover that another day!

🏗️ What are commodities?

We’ve already given a few examples of different types of commodities. The commodities market is categorised into several segments, these can be wildly different from each other but they all feed up into why commodities are important.

Precious Metals: Includes gold, platinum, and silver.
Industrial Metals: Covers essential industrial metals like copper, iron, and aluminium.
Energy: Comprises of oil, natural gas, and coal.
Agricultural: Involves crops such as coffee, barley, and rice.
Emissions Trading Systems (ETS): Focuses on carbon emissions trading. Only some countries have established markets for this, it’s the newest kid on the commodity market’s block.

📊 How big is the commodities market?

From a global perspective, the commodities market is projected to reach significant volumes. In 2025, the United States is expected to lead with a nominal value of USD $53,230 billion. Following closely are China with USD $24,110 billion, and European countries like Italy, France, and Germany with values ranging from USD $3,416 billion to USD $2,832 billion.

Overall, the global commodities market is anticipated to hit a staggering USD $123,000 billion in 2025, with a forecasted annual growth rate (CAGR 2025-2029) of 2.69%, culminating in an estimated total of USD $136,800 billion by 2029.

Friday’s Insider’s special on 🌾 Agriculture ➡️ Cocoa

Today we introduced some basic concepts to help you better understand the world of commodities and their global dynamics.

This Friday, we'll dive into the agricultural sector, focusing on cocoa! We'll explore why cocoa prices have surged an astonishing 310% in 2024, significantly outstripping even gold and Bitcoin. We’ll examine the driving factors and discuss what it means for the chocolate industry and consumers alike. Stay tuned!

In Case You Missed It 📬

Gulf States Pivot from Oil to Innovation

Let's take a whimsical dive into the Gulf states, where not only does oil abound but innovation is surging as these countries ambitiously bet on a future beyond fossil fuels.

Known traditionally for their vast petroleum reserves and deep-rooted Islamic cultural tenets, members of the Gulf Cooperation Council—Saudi Arabia, UAE, Kuwait, Qatar, Bahrain, and Oman—are evolving from oil barons to burgeoning patrons of science and academia.

Despite historically lagging behind in technological innovation, with only two Nobel laureates in sciences since the award's inception in 1901, the region is committed to change. Current R&D spending in the UAE is just 1.5% of GDP, with Qatar at 0.7% and Saudi Arabia at 0.5%, all below the OECD average. However, recent years mark a significant shift, with the Gulf nations making substantial educational investments. The UAE has unveiled a comprehensive policy on science, technology, and innovation, along with opening the National University of Dubai. Saudi Arabia is revitalizing the King Abdullah University of Science and Technology (KAUST) to align with Crown Prince Muhammad bin Salman’s "Vision 2030," and Qatar is focusing on increasing patents and R&D expenditure to fuel innovations by 2030.

Despite their opulent ambitions, the GCC's investment in education and research is still playing catch-up, yet the commitment is evident. With Saudi Arabia allocating 17% of its budget to education, closely followed by Oman (16.7%), these nations are not merely dreaming big; they are investing heavily. As the Gulf states transition from oil rigs to laboratory rigs, the question remains: Will they strike academic gold? Only time will tell if these desert dynamos can successfully transform from oil barons to science czars.

📙 TikTok Refugees Flock to RedNote as Ban Looms

Recently we have talked about the looming TikTok ban, and this week's explosive news revolves around the massive migration of TikTok's American user base. As the January 19th deadline approaches, potentially seeing TikTok suspended in the US, tens of millions are turning to RedNote, another Chinese-owned platform that has quickly become the most downloaded free app on the Apple App Store as of Monday.

Known in China as the "little red book," RedNote has captivated TikTok’s displaced audience with its vibrant mix of lifestyle content, videos, and community-building tools. A new user on RedNote, explained in a video, "The reason there are so many Americans coming over all at once is because TikTok is about to be banned in the US." Influencers on TikTok are actively leading the migration to this Chinese app, RedNote, as a form of protest against the ban.

For this Chinese company that skyrocketed to fame overnight, managing the massive influx of traffic poses a significant challenge. Promising strategies currently under consideration include rapidly developing a translation feature, speeding up post moderation, redefining algorithmic recommendations based on domestic and international content, and potentially developing an international logistics component. What happens next in this dynamic saga? Let’s wait and see!

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