Precious metals shine,energy complex dull amidst a weak start to commodities in 2014

London (Jan 11)   Commodities complex witnessed a weak start in 2014 with energy, base metals complex suffering losses while precious metals, livestock posted gains.This signals the possibility of a weak January performance in commodities unlike previous years which witnessed strong performances, according to Ole S Hansen, Head of commodity strategy at Saxo Bank.

After energy complex led lower by WTI crude oil- industrial metals were the second worst performing sector due to concerns about the strength of growth and financial stability in China.

All four precious metals can somewhat surprisingly, at least when it comes to gold and silver, be found at the top of the performance table so far this January and the far worse than expected US job report created some additional support. Both coffee varieties of Arabica and Robusta are the other two strong performers together with Live Cattle where the price has reacted positively to the coldest US winter in 20 years which has raised the spectre of lower beef production due to a slowdown in weight gain, Ole S Hansen noted.

Crude Oil
WTI crude oil dropped to an eight-month low after slumping by almost 10 percent since December 27 on a combination of ample supply and bullish projection for a continued rise in domestic US production. Brent crude has been better supported and this has resulted in its price premium over WTI rising to USD 14 per barrel. The market is still not fully convinced that the recent pick-up in production from Libya will last with the eastern part of the oil rich country still not seeing any progress towards solving issues between the government and local leaders.

Chinese imports of crude oil grew by the slowest rate in almost a decade in 2013. Oil demand growth from countries like China are currently needed in order to avoid the global oil market becoming too liquid and indications continue to point towards a year of plenty resulting in a lower average oil prices than what has been witnessed in the previous three years.


Gold managed to hold onto the gains recorded during the first week of trading, this despite another flash crash in the futures market last Monday which saw the price drop by more than 30 dollars in a matter of seconds after a significant amount of sell orders were triggered at the same time. The drop from 1245 to 1212.60 on the February future quickly attracted new buyers and the price moved back up rapidly and spent the rest of the week trading relatively calmly around the USD 1230/ounce level.