2016 saw commodities climbing steadily in price for the first time since 2010. Hedge funds across the industry are now anticipating that these gains are likely to continue for the foreseeable future, according to signals that their investments are showing. According to data provided by Bloomberg, money managers in a variety of funds have continued to boost their investments in net-long positions for a number of different commodities.

Wagers on Price Gains Jump by 9.7%

According to Bloomberg, hedge funds have boosted their total net-long positions in 18 different commodities by about 9.7% in the month of December, 2016. This is a massive change from the previous December, when most funds were net-short. In the last week, investors increased their optimistic bets on commodities ranging from crude oil, soybeans, cotton, and cattle. Not all commodities were affected in this way, however, as optimism lagged for commodities including cocoa, wheat, and corn.

Prices Jumped Thanks to Supply Resetting

Years of overabundance of supplies in metals and energy had previously led to five years of losses in commodities in those areas. Now, with supply levels settling out, prices for those raw materials have surged, with companies including Citigroup Inc. predicting that many commodities will continue to maintain strong performances in 2017 thanks to growth in global economies. Goldman Sachs made a similar prediction in November, suggesting that an overweight position in raw materials would be beneficial.

Over 1 Million Futures

As of the final days of 2016, hedge fund net long positions across 18 U.S. commodities had declined very slightly but still included 1.08 million options and futures. At the same time, the Bloomberg Commodity Index, which follows returns for 22 different commodities, jumped by 11% in total for the year of 2016. Zinc saw the highest jump of all, climbing by 60% thanks to supply declines. Wheat, on the other hand, saw the largest decline over the same period. Industrial metals climbed in a big way as well, particularly in the last few months of the year. Copper jumped by 13%, marking its most significant gains since 2010 and boosted by Donald Trump's victory in the polls. Trump's win brought prices of precious metals down, on the other hand. Nonetheless, gold bullion saw the highest gains in five years in 2016, and many analysts are predicting that gold will begin to climb again once the Trump administration takes office later in January. A Bloomberg survey of investors showed that experts predict gold will continue to climb throughout the year and may see gains of as much as 13% across 2017. Gold will likely be one of many different commodities which see a lot of investment action in the year to come.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.