Commodities: worst performing asset class for second year in a row

Posted by Commodity Online

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18217782811385983887Agri-commodities have seen heavy losses, rebuilding in global inventories suggests headwinds fo the sector are likely to continue. Aside from a moderation in the use of corn for ethanol purposes, possible changes to farm susbsidies in China could also see a reduction in this country’s agricultural imports.

LONDON (Commodity Online): Commodities continue to be the worst performing asset class for second year in a row, but it could signal a recovery in returns heading into next year, according to Deutsche Bank.

The bank expects Crude oil to be sensitive to the possibility of Iranian sanctions easing while Natural Gas is bullish on weather-deficit is seen in storage and further upward price movements could mean its decreasing competitiveness with CAPP coal.

The banks retains its negative view on gold and gold will find solid support when ETF outflows cease, it added.
Among base metals, Copper is showing continued signs of strong demand while surplus concerns pull down the market.

Agri-commodities have seen heavy losses, rebuilding in global inventories suggests headwinds fo the sector are likely to continue. Aside from a moderation in the use of corn for ethanol purposes, possible changes to farm susbsidies in China could also see a reduction in this country’s agricultural imports.

Highlights of technical view on commodities

Technical charts continue to paint a picture of weakness for gold, silver, platinum and sugar having seen its Relative Strength Index (RSI) below 30 indicating extremely oversold conditions.

-Aggregate open interest for the majority of the commodities is above the median of the 2-year range. It is worth noting that aggregate open interest for the PGM sector is at high levels near the 75th percentile.

-However, aggregate open interest for RBOB gasoline and gold is at low levels, below the 5th percentile.

-The performance of the energy sector has been better as compared to the rest of the sector. In the metals and agriculture sector, palladium is the only commodity above the median while the rest of the commodities are trading close to or below the 5th percentile level.

-Implied volatility has deteriorated further for all commodities across four broad sectors. Gold is the only commodity for which implied vol is near the median level. Implied vol for the rest of the complex is at very low levels, below the 5th percentile.

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