It is no secret that the bull run has spelled trouble for precious metals, especially the likes of silver and gold. The two flagship precious metals have been taking a hit for quite some time now, as investors continue to exit their positions in the hard assets for greener pastures in the equity world. Now, both of these commodities are sitting at multi-year lows, leading investors to wonder what their future holds [for more commodity news and analysis subscribe to our free newsletter]:
In 2012, gold endured a bull run that was unlike any that commodity investors had ever seen. The precious metal managed to notch 12 straight annual gains through 2012. That meant that until 2012 had expired, the ultra-popular SPDR Gold Trust (GLD) had never seen a negative annual performance. That quickly came to a head in 2013, as gold sank more than 30%, finally enduring a correction that seemed long overdue [for more commodity news and analysis subscribe to our free newsletter].
As the summer months continue, a number of commodities hit a turning point in their seasonality, triggering movements in their prices and expectations of future prices. As such, taking a look at commodities exhibiting contango is a healthy exercise to ensure that you have a firm grasp on the current state of the hard asset world. As a quick reminder, contango is the process whereby near month futures are cheaper than those expiring further into the future, creating an upward sloping curve for future prices over time [for more commodity news and analysis subscribe to our free newsletter].
The first half of 2014 is in the books, and commodities have finally started to see something of a turn around. Commodities had a tough 2013, while equity markets made an unprecedented run higher, turning investor’s attention away from a floundering commodity space. But the first six months of this year saw hard assets move higher and hold pace with broad markets, injecting some much-needed life into the commodity world [for more commodity news and analysis subscribe to our free newsletter].
2013 was certainly a brutal year for precious metals and precious metal miners. Lower metal prices and rising operating costs made it difficult for many miners to log in a good profit last year. So far in 2014, however, many miners have been able to gain significant ground. While this corner of the market typically performs better during times of economic uncertainty, due to the fact that precious metals prices are usually driven higher, this year the commodity has managed to stay afloat despite the overall positive outlook for the economy [for more commodity news and analysis subscribe to our free newsletter].
When it comes to commodity investing, precious metals are some of the most highly traded commodity markets in the world. Gold in particular, has long been embraced for its inherent value and safe haven appeal. Historically, investors have added gold exposure to their portfolio via physical holdings or futures trading, but thanks to the democratization of the ETF industry, gold exposure can be purchased through a single ticker [for more commodity news and analysis subscribe for our free newsletter].
With four months complete, 2014 has been a mixed bag for commodity producing stocks. While broad equity markets are hovering at about breakeven for the year, many commodity intensive stocks have made big pushes in both directions. Below is a look at some of the sectors that are both leading and lagging through the first four months of 2014:
It seemed like nothing could stanch the flow assets pouring out of gold this past year. As equities rallied and saw new high after new high, gold took a beating as investors flocked to a more lucrative corner of the market. Slowly but surely, however, gold has pulled itself from the depths and was able to break through a key resistance at $1,336/oz. last week. Now, the precious metal sits at a key turning point, as it tries to establish a definitive upward trajectory for the remainder of 2014 [for more gold news and analysis subscribe to our free newsletter].
Contango is the process by which near month futures are cheaper than those expiring further into the future, creating an upward sloping curve for future prices over time. It usually stems from the cost of storing commodities prior to their sale, though a futures curve can also reflect market expectations of where a commodity is heading. Though contango often comes handcuffed to negative connotations, it typically is not a problem for traders and investors who are aware of it [for more commodity news and analysis subscribe to our free newsletter].
Earnings season is just about over, and the Street will soon have to turn its eyes to macro data to decide where markets go from here. Thus far, this batch of earnings has been a mixed bag; though a number of key companies beat estimates, lowered guidance took precedent. It seems that this time around, investors are very focused on how companies are guiding, especially given the Fed’s current taper process [for more commodity news and analysis subscribe to our free newsletter].