2013 was another down year for the commodity markets. In the metal markets, gold was off some 28%, breaking a twelve-year winning streak. Silver prices also got hammered, down some 36%, but platinum and palladium fared better on account of improving automobile demand. Among the base metals, zinc was the year’s best performer ending down some 1.6% basis three months, while nickel and aluminum were the group’s laggards, down 18.5% and 13% respectively. Copper finished some 7% lower, with lead and tin off by 4.7% and 4.4%, respectively.
In the financial markets, US equity markets were on fire; the S&P-500 was up some 29% in 2013 for its best gain since 1997. Many other equity markets also ended the year at or near records– Japan’s Nikkei 225 rose a whopping 52%, reaching its highest level since 2007 and there were hefty gains in European markets, with 30%-plus gains seen in both the Greek and Irish equities. The gains in US equities came partly at the expense of the US bond market, where yields ended the year around 3%, a 2 1/2 year high, capping a horrific year for most bond funds.
Last month we had an upbeat market in copper, with prices gaining 4% over the course of the December and hitting a four-month high in the process. However, for 2013 as a whole, copper finished 7.2% lower, roughly in the middle of the LME pack. The December rally was driven in part by the weaker dollar, as well as continued declines in both LME and Shanghai stock holdings. LME inventories shrank by about 60,000 tons in December to end the month at about 366,000, while Shanghai stocks fell by 16,000 tons.
In terms of supply/demand balances, the ICSG sees the market in a 387,000 ton surplus in 2014, rising to a whopping 632,000 next year. However, the Reuters consensus numbers are far less, at 182,000 tons and 328,000 tons, respectively.
Copper steadied on Tuesday above the two-week lows it hit on Monday, helped by a weaker dollar versus the euro although the market was quiet as traders focused on U.S. data due later this week. Three-month copper on the London Metal Exchange was $7,335 a tonne in official prices from $7,325 at the close on Monday when it hit its lowest since Dec. 24 at $7,278.75 a tonne.
In December, outgoing Fed Chairman Ben Bernanke started the process of navigating the U.S. central bank’s way out of its extraordinary stimulus, beginning with shaving its bond-buying programme. A stronger U.S. currency makes it more expensive for foreign investors to purchase dollar-priced commodities, thus pressuring prices lower. The euro rose versus the dollar on Tuesday after data showed euro zone inflation fell last month.
The Federal Open Market Committee’s (FOMC) minutes will be released on Wednesday and the non-farm payrolls numbers on Friday.
Speculative investors increased their net copper longs for a third consecutive week in the week to Dec. 31, data from the Commodity Futures Trading Commission showed, climbing by 6,147 contracts to 35,635, the highest in nearly two years.