Despite another year of flat performance from the S&P GSCI, it was a roller-coaster year with energy holding up the broad index while gold had its worst year since 1981. Below are the top 13 stories from 2013:
13. Risky Assets, Safe Havens or Lost Identities? All commodities in the S&P GSCI and the DJ-UBS CI crashed on June 20, 2013, losing 3.1% and 3.0%, respectively, after the Fed declared the U.S. economy was expanding strongly enough for the central bank to begin slowing the pace of its bond-buying stimulus later this year. This is generally bad news for commodities since historically as the U.S dollar strengthens, goods priced in dollars become more expensive for other currencies. The historical negative relationship between the U.S. dollar Read more […]
12. S&P GSCI Precious Metals Hits Lowest Since October 2010 On April 15, 2013 the S&P GSCI Precious Metals dropped 9.6% in one day, entering a bear market from the 2013 high occurring on January 23. Since then, the index has fallen further to hit its lowest level of 1733.52 since October 1, 2010 when it was at 1717.53. The precious metals index is down 20.1% YTD, and is off 21.3% from its 2013 peak of 2202.41. Uncertainty ahead of the Federal Reserve meeting may be causing gold investors to fear whether the Fed will signal the end or a reduction Read more […]
11. Strong as Steel: Impacts of New Futures This morning I was interviewed for CCTV2 on the impact of new futures markets with a focus on iron ore. Although Iron ore is not in the major indices, the DJ-UBS and S&P GSCI, it is an economically significant commodity that is the main input for steel. I thought you might be interested in the questions and answers, 1. What can we take-away from the launch of China’s Dalian Commodity Exchange’s new futures market? It is exciting when there is a new futures market launch. Generally, Read more […]
10. Paying Too Much at the Pump?! Why are gas prices so high? I know I’m not alone as “a commodity lady” wondering this as I pull out my credit card to pay at the pump. (Which is not often since I ride my bicycle to work most days) Gasoline prices typically rise in the summer because more people travel to take vacations. However, this July, the S&P GSCI Unleaded Gasoline gained 12.0%, which was the 4th highest increase in July in the history of the index (since 1988,) and the biggest rise in July since 2005 when the Read more […]
9. Ready to Roll or Need to Weight? In the past few years a number of indices have been launched with a goal of minimizing the impact of contango. The first indices launched with this goal were the simple (1-5 month) forward indices and the relatively static S&P GSCI Enhanced. In the time period from Aug 2004-May 2011, mentioned in my prior post, these indices did the job of outperforming the front month contracts in the S&P GSCI by reducing the negative impact from contango as shown in the chart below. However, Read more […]
8. Fear Gauge Spikes: Let’s Play Hot Potato For what risk does the commodity investor get paid? At what point is the fear gauge so high the risk gets passed like a hot potato? The answers to these questions will help explain why post the global financial crisis there has been a link between VIX spikes and commodity losses. Let’s address the first question of what risk the commodity investor takes to be compensated. While there are five fundamental sources that drive the commodity asset class returns, the insurance risk premium is a major Read more […]