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Upward Commodity Price Momentum Slows In October

 November 12, 2012 03:20 PM


Upward commodity price momentum slowed considerably in October as markets digested mixed economic news and global growth forecasts, according to a report from money manager Van Eck Global and Bloomberg.

Persistent concerns surrounding global GDP growth, particularly in the case of China, which saw its growth forecasts cut by both the IMF and the World Bank resulted in commodity price momentum slowing considerably during the month, the report noted.

According to the report, disappointing U.S. corporate earnings also appeared to weigh on the markets, as did uncertainty over how the commodity markets would perform following the results of the U.S. presidential election. 

The UBS Bloomberg Constant Maturity (CM) Commodity Total Return Index, returned a negative 4.10 percent in October, bringing year-to-date (YTD) performance through the end of the month to 2.28 percent.

[Related -Ford Motor Company (F) Q2 Earnings Preview: Light on the Top Line?]

Data from Van Eck Global and Bloomberg showed livestock was the only commodity sector to perform positively during October. Agriculture, energy and precious metals all declined and industrial metals were the worst performing sector.

Natural gas contango widened significantly, and remained at even more severe levels than in recent months. Gold contango narrowed slightly and silver moved into contango, the report showed.

Contango refers to an upward-sloping futures curve. When a curve is in contango, the futures price is greater than the spot price. As a result, the price of a futures contract is greater than the price of an expiring contract. When this occurs, investors will incur an added cost each time a contract expires and it is rolled over and replaced it with another contract.

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