The year 2013 has been quite slow for commodity market as they slumped to a great extent. From gold to corn to sugar to raw materials, all commodities have seen downward movement so far this year. In fact, according to some estimates so far this year the prices head for their first annual loss since 2008 which is quite worrying trend for investors.
Moreover, in the slow commodity market, the Standard & Poor’s GSCI Spot Index of 24 raw materials fell in December 83 percent. It has happened for the first time in the last four decades. The last time any such development took place was in 1971 when the benchmark gauge was posting losses for the year through November.
Investors Pulling Out from the Market
According to market observers a major reason behind the slow commodity market is its lower return and in consequence investors are pulling out of it. In fact, they have pulled a record $34.1 billion from commodity funds since the end of December. Additionally, thanks to ample rains there has been a bumper global crop which has increased the supply base.
Additionally, there is increased mine output spurred supply gluts in metals and oil. When it comes to oil production this year, the U.S. is extracting the most crude oil since 1989. The record breaking production on the part of the U.S. has slowed the WTI crude prices to a great extent and they have fallen to the levels of the 1990s.
Similarly, as economic growth in China has slowed to a great extent the demand for raw materials such as coal, iron ore, zinc, cotton, etc. have fell remarkable. China has been the largest consumer so far when it comes to raw materials and its economic slowdown was expected to have a grave impact on the commodity market.
In fact, there has been great loss for sixteen members of the S&P GSCI which are all heading for annual losses, particularly, when there is no hope for grains and the precious metals market. Grains and the precious metal market has been sliding to a great extent. Similarly, the commodity index has fallen 4.3 percent this year.
The precious metal’s consumption has slowed down this year and gold prices fell remarkably. The largest consumer of gold, India imposed heavy duty to curtain its current account deficit; this according to the World Gold Council impacted the gold prices to some extent.
To contact the reporter of this story: Jonathan Millet at firstname.lastname@example.org