“Stockpiles are low going into 2020 and, with the expected pickup in demand, a lot of industry players find themselves short of inventories.”
Raw materials have also enjoyed a tailwind from a weaker US currency, with the Bloomberg Dollar Spot Index retreating 1.8 per cent this month to the lowest level since July. After three interest rate cuts this year, the US Federal Reserve is expected to hold monetary policy steady over 2020.
Concerns among investors about the possibility of the onset of a US recession — which hurt commodities earlier this year — have eased. This month, bond manager Jeffrey Gundlach said the odds of a recession by the end of next year have dropped to 35 per cent. In September, he had predicted 75 per cent.
Conditions in China, the top raw-material user, are picking up too. The nation’s economic performance improved in December for the first time in eight months, according to earliest-available indicators compiled by Bloomberg.
The advance in raw materials has been broad-based. Crude in New York has risen to the highest since September, with prices up 37 per cent this year as the OPEC+ group of producers presses on with supply curbs.
In base metals, copper has surged far above $US6,000 a tonne as global stockpiles sink and the macro-economic outlook brightens. Wheat is trading at the highest since 2018 and soybeans are set for the biggest monthly advance since 2016.
There have been gains in precious metals too, including traditional haven gold, which has climbed in December even as the risk-on mood prevails and equity markets set records. Bullion on the spot market has risen 3.5 per cent this month to about $US1,515 an ounce as of 9:39 a.m. in New York.