The Bloomberg Commodity Index gained 4.4% in the fourth quarter of 2019. An index of industrial metals was approximately flat over the three months, but benchmarks representing energy, precious metals and agriculture all climbed higher.
The price of Brent crude rose by about 9% in the period, from just over US$60 per barrel (bl) to approximately US$66/bl. The increase came partly as leading oil-producing countries agreed to cut production, amid concern about the demand outlook should the global economy slow further and plentiful US shale supply.
Worries about the economy combined with rising tensions in the Middle East to drive gold to its fifth straight quarter of gains, bringing the price of the yellow metal to a calendar-year increase of 18%. The NYSE Arca Gold Miners Index of gold companies also delivered positive returns, rising by 10% in the fourth quarter to end 2019 up more than 41% for the year. The long-awaited surge in gold-sector M&A activity finally materialised, with nine deals agreed or proposed during the quarter.
Among other metals, the platinum group metals (platinum, palladium and rhodium) finished the year strongly, capping a year of substantial gains amid tight supply; iron ore was little changed as seasonal restocking offset weakness in steel markets; and economic-bellwether copper ended 2019 on a brighter note, partly due to a more optimistic outlook for Chinese manufacturing.
Among agricultural commodities, corn traded in a narrow range during the last three months of 2019. After a slow start to the harvest, concerns over the US crop eased towards year end as frost stayed away long enough for farmers to catch up. Prices for potash, a key input into fertilisers, ground lower throughout the fourth quarter, with production cuts insufficient to offset weaker buying.
At a glance - our asset class views
|←||Base metals & bulks||←|
|Agriculture & softs|
- Consolidation in the gold sector looks set to continue.
- Geopolitical tensions are clouding the oil outlook.
- In environment sectors, 2020 could be the year of the electric car.
- The platinum group metals may yet rise further.
- Ample supply could cool the copper market in Q2.
Views of Investec Asset Management’s Natural Resources team and reflect preferences within respective asset class. As at 31.12.19.