Despite the recent slump, commodities have been flying high amid inflation fears, making them an ideal go-to asset to help hedge rising consumer prices. As such, big banks have been making a killing on commodities, as reported by Bloomberg.
The gains have been historical with reference to the financial crisis in 2009, according to past data. Rising oil and gas prices are helping to lead the charge, but agricultural commodities have also risen profoundly thanks to Russia’s invasion of Ukraine, which sparked a global food crisis.
“The world’s biggest banks are on track to make a killing in commodities this year, surpassing the record sums they made in the financial crisis,” the report noted. “The 100 biggest banks by revenue are set to make $18 billion from commodities trading in 2022, according to data and estimates from Vali Analytics in London. That would be the highest in the data, which goes back 14 years, and exceed the previous high watermark in 2009.”
Volatility Equals More Gains
Traders understand that fluctuating markets can create an abundance of opportunities. That’s especially the case with commodities, which can experience heavy volatility, as the markets have seen during the first half of 2022.
“Sky-high commodities prices have pushed inflation to multi-decade highs, stifled the global economy and created a cost-of-living crisis in many countries,” a Reuters report said. “But volatile markets mean banks can make more money by trading commodities and offering financing, risk hedges and other services to clients ranging from traders and funds to utilities and airlines.”
“Commodities trading desks have benefitted from the unprecedented volatility,” said Michael Turner at Coalition. The CBOE Volatility Index is up about 46% for the year.
Investors looking to get commodities exposure can consider a pair of exchange traded funds (ETFs) from Teucrium. Getting exposure via ETFs means that investors don’t have to hold various positions to get diversification in commodities.
Investors can have it all in the convenience of one ETF: the Teucrium Agricultural Fund (TAGS). The fund combines exposure to corn, wheat, soybeans, and sugar through other Teucrium ETFs that focus specifically on these commodities, essentially offering investors a fund of funds.
For more news, information, and strategy, visit the Commodities Channel.