By Roland Morris
Portfolio Manager and Strategist, Commodities
Macro Outlook: Industrial Metals Saved the Day
January was a mixed month for commodities. The energy sector fell mostly due to sharp declines in natural gas because of warm weather in the U.S. Interest rates fell as investors pushed back against the U.S. Federal Reserve’s hawkish comments, causing the U.S. dollar to decline slightly during the month. Natural gas waned while the industrial metals’ rally helped the UBS Constant Maturity Commodity Index (CMCI) outperform its peer, the Bloomberg Commodity Index (BCOM), by a wide margin. CMCI was up 2.58% and BCOM declined by 0.48% during the month.
Industrial Metals Sector Outperformed, Led to Strong Gains
The industrial metals sector was up 9% for the month, led by strong gains in aluminum, copper and zinc. China’s reopening, along with production concerns in South America, triggered the strong rally. Political upheaval and conflict in Panama and Peru have disrupted production at several important mining operations.
The precious metals sector, led by strong gains in gold, was up 4.9% in January. The declining U.S. dollar, falling U.S. interest rates, and rising global geopolitical conflicts supported the gold rally.
The agriculture sector gained 1.8% in January as coffee and sugar led the rally. The livestock sector declined by 2.6% led by a fall in live hog prices.
The energy sector detracted the most from January’s CMCI returns, entirely due to the sharp decline in natural gas prices during the U.S.’s warm winter weather.
CMCI Outperformed BCOM in the Energy and Industrial Metals Sectors in January 2023
Performance by Sector Components
Source: Bloomberg. Data as of January 2023. Past performance is no guarantee of future results.
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Originally published 14 February 2023.
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