These Hard Assets Got Crushed…
Well, here we are!
With July’s arrival, the second half of 2013 is officially underway in the markets. That means it’s the perfect time for a first half commodity performance review.
Let’s start with the worst performers over the past six months…
Silver- down 35%: As many long-time readers remember, the white metal was a top-performing commodity in 2010 and 2011. But since then, silver has slowly fallen out of favor with investors. Over the past six months, investors dumped the metal in favor of the seemingly unending appeal of equities.
Gold- down 25%: The yellow metal has suffered through the worst first-half performance since 1981. Investors dumped gold as Ben Bernanke and the Federal Reserve publicly toyed with the idea of tapering back quantitative easing (QE). As you may know, the fear of endless QE and resulting inflation was the prime bullish catalysts for gold in the first place.
Corn- down 23%: After last year’s remarkable drought induced corn rally, the commodity is falling back to earth in 2013. US farmers planted the biggest corn crops in decades this Spring, and as long as the weather cooperates, a bumper crop should be coming our way this Fall.
Lumber- down 21%: Hurricane Sandy, along with an expected recovery in the US housing industry, sent lumber soaring from $280 per thousand board feet to just over $400 in late 2012 and early 2013. But since then, the price of lumber has fallen precipitously. Increasing supply from US lumber mills has helped bring prices back to earth.
Wheat- down 15%: The course grain has followed corn lower on signs of record global output this harvest season. Farmers from around the world are expected to produce 683 million metric tons of wheat according to the International Grains Council. What’s more, a record US corn crop will likely ease pressure on wheat demand for livestock feed.
Coffee- down 15%: Surging output from Brazil and Vietnam has kept the coffee market in a strong downtrend this year. The soft commodity recently broke below $1.20 a pound, the lowest price in this market since September 2009.
Sugar- down 15%: Much like coffee, sugar has been stuck in a brutal downtrend this year. The sweet commodity is currently trading at 16.4 cents a pound, the lowest price since the summer of 2010. Record cane crops out of Brazil’s Centre South region are helping to drive prices lower.
Platinum- down 10%: Unlike gold and silver, platinum is falling in the face of remarkably bullish fundamentals. In fact, the global platinum market is expected to be in deficit by 844,000 ounces in 2013 as South African mine problems come front and center. Regardless, the metal has followed closely in gold’s footsteps in the first six-months of the year.
As you can see, it’s been rough for these commodities in 2013.
And the list above only includes the biggest losers from the first six months of the year. Other commodities like live cattle, cocoa, and palladium are down 7%, 3%, and 2% respectively, in the same time frame.
Besides bearish fundamentals in many of these individual markets, a rising US Dollar is bringing most commodities lower this year. Ben Bernanke’s QE tapering dialogue sent the US Dollar index cruising to 52-week highs in May.
Tune in Friday when I’ll cover some of the winners from the first six months of 2013.
I’ll also tell you what to expect from all commodities in the latter half of the year!
Until Next Time,
Justin Bennett
Category: Commodity Trading
