The chart below shows clear correlations between the performance of oil, gold and wine over the past 15 years. Demand from emerging markets, namely China, has been one significant driving force behind movements in each of these three markets. In the case of fine wine, prices surged following the removal of tax in Hong Hong and fiscal stimulus in China in 2009 but fell following government clamp-downs on gift giving. It would therefore appear that in spite of having no conventional economic use, fine wine has become part of the broader commodity cycle.
However, although fine wine has behaved in a similar way to other commodities in the past decade, it is in many ways unique. As the chart below shows, booms and busts in the fine wine market are also influenced by internal factors such as successful and less successful En Primeur campaigns: here, 2005 and 2010. In addition, while being an investable asset on one hand, fine wine is also a consumable and hence supplies are reduced over time as bottles are opened. It is for this reason that wine is able to break out of this commodity cycle: while oil prices crashed in the final quarter of 2014, the fine wine market began to see positive signs.
Image source: James Miles on ‘Speculation is dead. Long live speculation.’
