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].
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].
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].
After enjoying a relentless bull run that lasted 12 consecutive years, gold finally broke in 2013. Having become a darling of the investing world for most of the prior decade, gold’s almost 30% losses hit especially hard, as the precious metal finally saw a correction. The downward spiral was brought on largely by a massive year for equities, as the S&P 500 saw its best annual return since 1997, prompting many to flee metals markets to try their luck with white-hot equities [for more gold 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].
After a 12-year unstoppable bull run, gold finally met its match in 2013. Investors had been hopping on the bandwagon with great success for a number of years, as it seemed that gold would never stop climbing. With the Fed committed to printing money as a part of its various quantitative easing programs and a general sense of uneasiness about the economy, gold was able to make historical highs in 2011. Though it fell off from its peak that year, it still had a positive run in 2012. 2013, however, was a completely different story [for more gold news and analysis subscribe to our free newsletter].
The Diwali holiday traditions in India are often marked by healthy gold purchases and increased use of the precious metal. The demand that India typically holds this time of year often offers a boost for gold prices, as citizens and jewelers across the country scoop up the commodity left and right. This year’s Diwali season, however, painted a much different picture as purchases and interest in the metal were quite muted [for more gold news and analysis subscribe to our free newsletter].