Are PGMs The Place To Be In 2014?
The first full week of 2014 trading is officially in the books. That means now is the perfect time to look at what commodities are starting off the year strong, and which aren’t.
First, let’s look at the losers…
Leading the way lower this year is crude oil with a loss of 6.1%.
Worries over Libyan supply coming back online, along with rumors of a big build in Cushing stocks, have bears in control of the market. And given the ongoing surge in US production, I wouldn’t be surprised to see this commodity drop into the high $80 a barrel range soon. However, we may see a short-term bounce before that happens.
Next up is sugar. It’s been nothing but pain for bulls since the sweet commodity put together a spectacular rally in September and October of 2013. As a matter of fact, sugar is losing ground so quickly that the 2010 low of $0.14 a pound is within reach.
Rounding out the biggest 2014 losers are soybean meal (-5.3%), natural gas (-5.2%), and heating oil (-4.9%).
And now for the gainers…
Leading the way higher in early 2014 is one of the biggest losers in 2013… coffee. The luscious bean has surged 7.1% since the start of the year thanks to ongoing short-term supply concerns.
In case you’re unaware, last year’s devastating price decline in the coffee market has a few global producers holding back supply. The short-term shortage these growers are creating is clearly having a bullish effect on prices.
But that’s only part of the reason coffee is surging…
Enormous rainfall in key Brazilian growing regions has investors concerned a once hefty crop estimate will become a shortfall. December rains in the South American country topped a 90-year record and may have damaged nearly 40% of the country’s Arabica bean crop.
Next up are the platinum group metals (PGMs)…
Platinum and palladium are also leading the way higher in 2014 with gains of 3.5% and 2.8% respectively.
As I’ve said many times over the past six months, the supply/demand fundamentals for these metals are very bullish. A recovering global auto industry, mixed with long-standing global supply issues, has the potential to make platinum and palladium top-performing commodities in 2014 and beyond.
Rounding out the top gainers thus far in the year are orange juice (+2.8%), gold (+2.5%), and feeder cattle (+1.6%).
I’ve said it once and I’ll say it again…
Commodities will likely perform well in 2014. The downturn we saw in 2013 was steep for some assets. But a return to solid global growth should lead to higher prices for most tangible asset markets.
Until Next Time,
Justin Bennett
Category: Commodity Trading, Precious Metals
