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Raw-material bull market fading as supply expands

By Maria Kolesnikova, Bloomberg

April 2, 2013 • Reprints

At a time when U.S. equities are trading near a record and the dollar is having its best start in three years, commodities will finish this quarter little changed from where they were at the end of 2012.

The Standard & Poor’s GSCI gauge of 24 raw materials will be at 644 at the end of June, 1.2% lower than now, according to the median of nine investor and analyst predictions compiled by Bloomberg. The index rose 0.8% this year, the worst start since 2003. Arabica coffee, silver and nickel will gain as cotton, crude and natural gas fall, analyst forecasts show. Investors had $132 billion tracking commodity indexes in February, Barclays Plc estimates.

Supplies of everything from copper to sugar to oil are now catching up with or exceeding demand after the S&P GSCI’s almost fourfold advance since the end of 2001 spurred new mines, wells and crop acreage. While the International Monetary Fund expects global economic growth to accelerate to 3.5% this year, from 3.2% in 2012, the Washington-based group cut its estimate three times since July. The 17-nation euro area already tumbled back into its second recession in three years.

“No one is really concerned we’re going to have any shortages,” said Bart Melek, head of commodity strategy at TD Securities Inc., the Toronto-based company ranked by Bloomberg as the most accurate forecaster on Brent oil and third-best in industrial metals over the past two years. “The big complaint is the inventories are probably a bit too high. It’s difficult for us, given the supply configurations across the commodity spectrum, to say that we’re going to see a lot of upside.”

Bull Market

The S&P GSCI beat the MSCI All-Country World Index of equities, the U.S. Dollar Index and the Bank of America Merrill Lynch Global Broad Market Index of bonds in six of the past 11 years. Commodities entered a bull market in August as the worst U.S. drought since the 1930s drove crop prices to records and oil rallied. The gauge retreated about 4% since then and ended 2012 at 646.58.

Nine of the 24 items in the S&P GSCI are in bear markets, having declined at least 20% from their recent highs. They account for less than 17% of the index weightings, with New York oil, gasoil and heating oil still in bull markets.

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Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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Related Terms
oil 6597bank 6455Bloomberg 5254Oil 4707commodities 3439Silver 3171metal 3075Standard & Poor 2008natural gas 1979International Monetary Fund 1712Morgan Stanley 934precious metal 869Goldman Sachs Group Inc. 864New York 841JPMorgan Chase & Co. 818U.S. Commodity Futures Trading Commission 658Citigroup Inc. 603Barclays Plc 573International Energy Agency 452Deutsche Bank AG 426coffee 390Bank of America Merrill Lynch 384Cotton 373heating oil 334Gas 219Nickel 81TD Securities Inc. 49Rabobank 44palm oil 31Bart Melek 27Oil demand 17Nordea Bank AB 16Ed Morse 10raw materials 4Hermes Investment Management Ltd. 4Cotlook Ltd. 4U.S. Dollar Index 1crude and natural gas fall 1Jason Lejonvarn 1

Free Newsletter Modern Trader Follow

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