The commodity market displayed a highly volatile appearance in 2022 due to the course of global economic activity and geopolitical developments. In February, the simmering tensions between Ukraine and Russia boiled over into a full-blown war. This caused commodities prices to surge in reaction – particularly food and energy – with especially sharp increases seen during the first half of this year. Furthermore, global recession concerns, which emerged due to a significant reduction in commodity supply despite geopolitical developments in the year’s second half and tightening steps in major central banks’ monetary policies, put commodity prices under pressure once again.
Uncertainties Affected the Markets Negatively
Amid recent economic uncertainties, the European Union implemented a cap on the price of Russian oil during the final month of 2022. This prompted a significant reduction in Brent crude oil prices and pushed them to 75 USD per barrel—a 20% decrease from previous yearly lows. Such an impactful move further destabilized global activity.
Russia’s decision to maintain a nuclear conflict option sparked worry and anxiety across the geopolitical landscape. On top of that, China had relaxed its pandemic measures, drawing speculation around whether it meant that global oil demand would later increase. Overall, this uncertainty drove up the average Brent crude oil price by an astounding 39.8%.
Gold Prices Were Also Affected by This Uncertainty
The first quarter of 2022 saw a rapid increase in the value of gold as geopolitical tension increased. However, this impressive rise was short-lived after central banks began tightening steps, causing gold prices to give back some of their gains. Finally, by the end of December 2022, gold reached 1,824 USD/ounce, representing a 3.2% annual percentage increase. This was despite further increases throughout the year, bringing the yearly rise to 1.5%.
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