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].
Last year, investors witnessed several corners of the commodity market falter. One of the hardest hit sectors, however, was metals and mining; both the commodity and its producers suffered tremendous losses in 2013. The popular SPDR Gold Trust (GLD) saw outflows of more than $23 billion last year, causing its assets under management to sink by more than 40%. Other metal funds, as well as individual mining companies, had similarly dismal performances [for more gold and silver news and analysis subscribe to our free newsletter].
Much to the bears’ frustration, major U.S. equity indexes are refusing to make way for profit taking pressures even as earnings season continues full steam ahead. The S&P 500 Index continues to inch further into uncharted territory, although over the past two weeks it has failed to continue its impressive streak of posting new highs, leading many to speculate about what headwinds could spark the next steep correction on Wall Street [for more commodity futures news and analysis subscribe to our free newsletter].
As we kick off the New Year, commodity investors are hoping that 2014 brings more favorable returns than its predecessor. Last year was largely marked by dwindling commodity returns with a number of hard assets wreaking havoc on investors and traders across the board. Gearing up for 2014, we take a look at some of the biggest commodities currently contangoed to help you get prepared for the new year [for more commodity news and analysis subscribe to our free newsletter].
Last week, we outlined the five hard assets that performed the best in 2013 and noted that the pickings were slim. Overall, it was a rough year for commodities, as a number of hard assets slumped while equities roared forward. Below, we outline the five worst performing commodities of 2013 [for more commodity news and analysis subscribe to our free newsletter]:
Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital, has long been a major presence in the precious metals industry. We had the chance to sit down with Peter to discuss silver, gold and his new fund that debuted earlier this year.
An event several years in the making could be just days away. For some time now, the Fed has been debating whether or not it should limit big banks and their participation in the commodities markets. The debate stemmed from a number of accusations of market manipulation for profit, though most of the institutions on the chopping block have maintained their innocence. The decision is expected to fall sometime in the next month and could be a welcomed change for traders [for more commodity news and analysis subscribe to our free newsletter].
Year-to-date, small capitalization equities have rallied alongside the broad market, as bullish momentum continues to be a dominating force and investors become more risk tolerant. These stocks typically offer more promising long-term growth potential than their large cap counterparts; however, investors will have to take on slightly higher levels of risk and volatility. Already this year, the Russell 2000 Index has surged more than 20%, urging investors to take a closer look at these promising securities [for more commodity news and analysis subscribe to our free newsletter].
With the first half of 2013 coming to an end, many investors are taking time to look back and see which portions of their portfolios will need revaluation, with many now worried that the commodity super cycle is drawing to a close. Though some commodities fared well in the first six month of the year, many failed to keep pace. Below, we outline the three worst performing commodities so far in 2013 to give investors a better idea of how the year is shaping up [for more commodity news and analysis subscribe to our free newsletter].
As the decade opened, precious metals (namely gold) were among the most popular commodities for long-term investors. Many had grown comfortable with the commodities as safe haven assets that would help to protect their portfolios from inflation and any unforeseen market dips. But Ben Bernanke may have let the air out of the precious metals world when he announced that the Fed would begin tapering its bond purchasing late this year or in early 2014 [for more precious metals news and analysis subscribe to our free newsletter].