While demand from China has slowed, improving economic conditions in the U.S. and Europe will support prices of some commodities including copper, according to Peter Jankovskis, who helps oversee $3.6 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments LLC.
German industrial production rose in November for the first time in three months, according to figures from the Economy Ministry in Berlin on Jan. 9. U.S. construction spending climbed 1% in November, topping analyst estimates, the Census Bureau said this month. Builders put about 400 pounds (181 kilograms) of copper into the average home.
“We will see demand of industrial metal rise because of growth in the Western world,” Jankovskis said. “While prices are not going to be rushing higher, we could see some of the commodities bottoming out.”
The S&P GSCI more than tripled since the end of 1999, including 11 gains over the past 14 years, setting records in everything from oil to gold to copper. Producers struggled to keep up as China’s economy expanded more than fivefold. The rally accelerated from December 2008 through June 2011, with the gauge surging 92% as the Federal Reserve increased its balance sheet through debt purchases. Gold has tumbled 35% from a record $1,923.70 an ounce reached in September 2011.
Increases in supply and slower demand mean that commodities will take a “back seat” to other investments this year because the gains from 2009 to 2011 were “built on unsustainable factors,” Citigroup said in a Jan. 6 report. Raw materials trailed global equities for a second year in 2013.
Fed officials said Dec. 18 they would trim monthly purchases of bonds to $75 billion from $85 billion starting this month as the economy improves.
Bullish bets on crude oil dropped 8.6% to 247,177 contracts, the sharpest decline since June, the CFTC said. West Texas Intermediate fell 1.3% last week and touched $91.24 a barrel on Jan. 9, the lowest since May. U.S. gasoline inventories rose to the highest since March in the week ended Jan. 3, Energy Information Administration data show.