NEW YORK: Speculators increased wagers on rising commodity prices by the most since August 2010 on signs that sustained economic growth will drive a rebound in raw materials from their first annual slump since the recession.
Hedge funds and other money managers increased combined net-long positions across 18 US futures and options by 18% to 536,907 contracts in the week ended December 27, Commodity Futures Trading Commission data show. Speculators trimmed bets on declining prices for copper, cocoa, wheat, and soybean oil and meal.
While the Standard & Poor's GSCI Total Return Index of 24 commodities declined 1.2% last year, it rallied 12% from a 10-month low reached in October on mounting optimism about growth. More than $3.3 trillion was added to the value of global equities since October 4, data compiled by Bloomberg show.
"The US is certainly putting the floor on commodities," said James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $330 billion of assets. "Data out of the US flies in the face of recession. More and more people are saying: 'Maybe things are not that bad."
The S&P GSCI Total Return Index rose 9% last quarter, snapping two consecutive three-month drops. The MSCI All-Country World Index of equities rose 6.7%, the most in a year. The US Dollar Index (DXY), a measure against six trading partners, gained 2.1%, the second straight quarterly advance, while the yield on 10-year Treasuries slid 2.1%, Bloomberg Bond Trader prices show.
On a total return basis, commodities lost 1.2% last year, the first annual drop since 2008, as Europe's crisis escalated and China's economic growth cool-ed. Funds have cut bets on higher prices by 65% since this year's high in April. More than $10 trillion has been wiped off the value of global equity markets since May 1 as markets were roiled by concern that the world would tumble into recession.
Investors withdrew $936 million from commodity funds in the week ended December 28, according to data from EPFR Global, which tracks investment flows. Gold and precious-metals outflows accounted for $688 million, while $248 million was withdrawn from other commodities, said Cameron Brandt, the director of research at the Cambridge, Massachusetts-based research company.
Inflows totalled $12.8 billion last year, of which $8.1 billion was into bullion, EPFR said. "We have seen people reducing risks, and the future of commodities largely depends on whether Europe and US can avoid a recession," said Nic Johnson, who helps manage $30 billion in commodity assets at Pacific Investment Management Co in Newport Beach, California.
Commodities plunged 46% in 2008 as the collapse of Lehman Brothers triggered the worst global recession since World War II. Prices rebounded 13% in 2009 and 9% in 2010 as governments around the world flooded markets with money to shore up growth.
"News from Europe continues to remain depressing, while US economic reports are getting better and better, and people think we will find the bottom for most of the commodities soon," said Michael Smith, the president of T&K Futures and Options in Port St Lucie, Florida.
Hedge funds and other money managers increased combined net-long positions across 18 US futures and options by 18% to 536,907 contracts in the week ended December 27, Commodity Futures Trading Commission data show. Speculators trimmed bets on declining prices for copper, cocoa, wheat, and soybean oil and meal.
While the Standard & Poor's GSCI Total Return Index of 24 commodities declined 1.2% last year, it rallied 12% from a 10-month low reached in October on mounting optimism about growth. More than $3.3 trillion was added to the value of global equities since October 4, data compiled by Bloomberg show.
"The US is certainly putting the floor on commodities," said James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $330 billion of assets. "Data out of the US flies in the face of recession. More and more people are saying: 'Maybe things are not that bad."
The S&P GSCI Total Return Index rose 9% last quarter, snapping two consecutive three-month drops. The MSCI All-Country World Index of equities rose 6.7%, the most in a year. The US Dollar Index (DXY), a measure against six trading partners, gained 2.1%, the second straight quarterly advance, while the yield on 10-year Treasuries slid 2.1%, Bloomberg Bond Trader prices show.
On a total return basis, commodities lost 1.2% last year, the first annual drop since 2008, as Europe's crisis escalated and China's economic growth cool-ed. Funds have cut bets on higher prices by 65% since this year's high in April. More than $10 trillion has been wiped off the value of global equity markets since May 1 as markets were roiled by concern that the world would tumble into recession.
Investors withdrew $936 million from commodity funds in the week ended December 28, according to data from EPFR Global, which tracks investment flows. Gold and precious-metals outflows accounted for $688 million, while $248 million was withdrawn from other commodities, said Cameron Brandt, the director of research at the Cambridge, Massachusetts-based research company.
Inflows totalled $12.8 billion last year, of which $8.1 billion was into bullion, EPFR said. "We have seen people reducing risks, and the future of commodities largely depends on whether Europe and US can avoid a recession," said Nic Johnson, who helps manage $30 billion in commodity assets at Pacific Investment Management Co in Newport Beach, California.
Commodities plunged 46% in 2008 as the collapse of Lehman Brothers triggered the worst global recession since World War II. Prices rebounded 13% in 2009 and 9% in 2010 as governments around the world flooded markets with money to shore up growth.
"News from Europe continues to remain depressing, while US economic reports are getting better and better, and people think we will find the bottom for most of the commodities soon," said Michael Smith, the president of T&K Futures and Options in Port St Lucie, Florida.
The US expanded at a rate of 1.8% this year and will probably grow 2.1% in 2012, according to the median of 70 economist estimates compiled by Bloomberg. Fewer Americans filed applications for jobless benefits in the four weeks through December 24 than at any time since June 2008, according to figures from the Labor Department on December 29.
Goldman Sachs Group Inc. said in a December 1 report that the world probably will avoid a recession and maintained its "overweight" allocation to commodities, predicting a 15 percent return in the next 12 months. A close balance between supply and demand across raw materials "could drive a strong price rebound in early 2012," Barclays Capital said last month.
Goldman Sachs Group Inc. said in a December 1 report that the world probably will avoid a recession and maintained its "overweight" allocation to commodities, predicting a 15 percent return in the next 12 months. A close balance between supply and demand across raw materials "could drive a strong price rebound in early 2012," Barclays Capital said last month.
(Source- http://economictimes.indiatimes.com/)
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