Dismal Year For Commodity Markets, Gold Neutral, Palladium Excels

By Neils Christensen of Kitco News
Wednesday December 31, 2014 10:12 AM (Kitco News) - As traders and analysts look back on 2014 the one theme that most can agree on is that commodity markets had a terrible year, while the U.S. dollar shone bright.
“Overall it has been a dismal year for the commodity complex with 2014 registering the largest annual loss since the global financial crisis of 2008,” said Tim Gardiner, managing director of global metals at TD Securities, in a note to clients Wednesday.
Although commodities struggled through 2014, gold was a modest source of strength as it ends the year near neutral territory. As of 9:48 a.m. EST, Comex February gold futures were at $1,194.60 an ounce, down $6.40 on the day.
Gardiner said while gold appears to be ending the year where it started the price averaged $1,265 an ounce in 2014.
Analysts have noted that the biggest factor affecting commodity prices this year has been the U.S. dollar, which has had its best performance since 2015. The U.S. dollar has benefited from an outperforming economy and interest rate differentials. While the Federal Reserve is contemplating normalizing interest rates other major central banks like the European Central Bank and Bank of Japan continue to loosen their monetary policy.
Analysts at BNP Paribas said in a research note Wednesday that the U.S. dollar is ending the year with double digit gains, rising about 12% on the year. They added that they expect to see continued U.S. dollar strength in 2015.
“The rapidly disappearing excess capacity in the US economy should keep U.S. yields supported and continue to boost the USD in 2015,” they said in their note.
According to data compiled by Brown Brothers Harriman, the yellow metal was their second best performing commodity of the year.
In BBH’s list, Coffee found the top spot for 2014, seeing 48.6% returns on the year. At the bottom of the list is crude oil, which lost more than 49% on the year.
The silver market was caught in the middle as prices lost about 17% on year.
Peter Hug, global trading director at Kitco Metals, said that within the precious metals complex, palladium is “the last metal standing” for 2014. Palladium is ending the year in positive territory with gains of about 12% on the year.
“Economic growth in 2015 will continue to affect palladium supplies, along with rhodium, which is in a similar situation, both may be the metal stars of 2015,” he said.