Commodity Monthly Monitor – Commodities buck cyclical shakedown Your reference guide to commodity markets. Includes the latest outlook for each commodity sector and major developments for individual commodities.
Summary
After capitulating in 2017, agricultural prices are picking up momentum in 2018.
Industrial metals continue to outperform based on strong fundamentals.
The energy complex was a drag on commodity performance last month.
Silver prices to play catch up as fundamentals improve.
Summary
While the S&P500, cryptocurrencies and bond prices fell last month, commodities posted gains. The S&P500 volatility index is now back to its normal territory after a protracted period of being subdued. Cyclical commodities like industrial metals however, continue to trade higher on firm fundamentals. Gains were not homogenous in commodities: the unsustainable rise in oil prices in January faltered in February and palladium has begun to unwind, coming closer to parity with platinum after consistently trading above since October 2017.As China re-opens after the New Year celebrations, better quality data from the largest consumer of commodities will come due.
Year-on-year comparisons of data from China in the months of January and February are very difficult because the timing of lunar New Year is not the same each year on the Georgian calendar. However, the Caixin China manufacturing purchasing managers index indicates that manufacturing output hit a 13-month high in January, setting a strong scene for industrial metals.The commodity complex was aided by a softer US Dollar. However, Federal Open Market Committee minutes (released after the cut-off of data in this report), indicate the US central bank is ready to raise rates faster than the market had previously assumed. That could lead to US Dollar appreciation if other central banks fail to reflect a similarly strong policy message
Rock bottom?
After capitulating in 2017, agricultural prices are picking up momentum in 2018. Prices have fallen so low that any hint of ‘good news’ appears to spark a rally.Industrial metals continue to outperform based on strong fundamentals. Despite the onslaught of the global equity market correction, industrial metals recouped their initial losses as fundamentals prevailed. Ongoing supply deficits for most metals coupled with strong demand bode well for the sector.
Commodity performance last month
The energy complex was a drag on commodity performance last month. A return to more normal weather in the US dampened natural gas prices while oil gave back unsustainable gains from January. The only area of the energy complex to post an increase was the price of carbon as environmental regulation is expected to address a glut in permits. Silver prices to play catch up as fundamentals improve.
The gold to silver ratio is currently at 81 (as on 16 February 2018), its highest level since April 2016. We expect silver prices to catch up owing to the continued strength in the industrial cycle and a constrained mine supply. Although the fundamentals remain strong : ongoing supply deficits and buoyant auto sales in China, we would not rule out further price correction from current levels given the sharp run up in prices in 2017.
For more information contact:
Catarina Donat Marques ETF Securities (UK) Limited T +44 20 7448 4386 E catarina.donatmarques@etfsecurities.com
Important Information
The analyses in the above tables are purely for information purposes. They do not reflect the performance of any ETF Securities’ products . The futures and roll returns are not necessarily investable.
General
This communication has been provided by ETF Securities (UK) Limited (“ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the “FCA”).
Denna ETCs TER (total cost ratio) uppgår till 1,00 % p.a. BNPP RICI Enhanced Brent Öl (TR) ETC är den största ETCsom följer RICI Enhanced BrentCrude Oil-index. Denna ETC replikerar det underliggande indexets prestanda syntetiskt med en swap.
BNPP RICI Enhanced Brent Öl (TR) ETC är en mycket liten ETC med 5 miljoner euro förvaltade tillgångar. Denna ETC lanserades den 2 september 2016 och har sin hemvist i Nederländerna.
Det betyder att det går att handla andelar i denna ETC genom de flesta svenska banker och Internetmäklare, till exempel DEGIRO, Nordnet, Aktieinvest och Avanza.
Valour Render (RENDER) SEK (VALOUR RNDR SEK) with ISIN CH1108679288, är en börshandlad produkt (ETP) som spårar RENDER, den ursprungliga kryptovalutan i Render Network. Render utnyttjar blockchain-teknik för att decentralisera GPU-baserad rendering, vilket ger skapare kostnadseffektiv och skalbar tillgång till beräkningskraft för visuella effekter, spel och design.
Render-nätverket är designat för att stärka digital kreativitet och kopplar samman användare som söker renderingstjänster med GPU-ägare, vilket optimerar resurser och minskar kostnaderna. RENDER-tokens används för betalning och incitament för deltagare i nätverket, vilket möjliggör sömlöst samarbete över det kreativa ekosystemet. RENDER-innehavare stödjer en vision om decentraliserad datoranvändning, som främjar innovation och tillgänglighet inom den digitala konst- och underhållningsindustrin.
Beskrivning
Valour’s Certificate-produktlinje erbjuder börshandlade produkter som uppfyller kraven, var och en helt säkrad av sina respektive digitala tillgångar. För att säkerställa säker kylförvaring samarbetar Valour med nivå 1-licensierade förvaringsinstitut som Copper. Handlade på reglerade börser och MTFer ger dessa certifikat transparent prissättning och likviditet, vilket stärker investerarnas förtroende för säkra digitala tillgångsinvesteringar. Valours grundprospekt är godkända av Finansinspektionen och uppfyller EUs krav på fullständighet, tydlighet och konsekvens.
Det betyder att det går att handla andelar i denna ETP genom de flesta svenska banker och Internetmäklare, till exempel DEGIRO, Nordnet, Aktieinvest, Levler och Avanza.
The outcome of the US election last month continues to reverberate through the crypto markets. The Nasdaq Crypto IndexTM (NCITM) has risen over 57% since November 5, fueled by widespread optimism over the direction of digital asset policy in the US.
As I wrote in a previous note, crypto assets tend to follow a four-year cycle that includes a bull phase of roughly 12 months, followed by a year-long bear market, and then a two-year recovery period. In the previous two bull markets, altcoins (i.e., everything outside of BTC) have significantly outperformed the largest crypto asset.
I believe we’ve entered a bull market, reinforced by the macro environment and US election outcomes. But there’s another data point signaling a bull market—the outperformance of the NCITM relative to BTC.¹ In the last three months, the NCITM has had a higher return than BTC (78.0% vs. 76.5%) and since the election, the NCITM has outperformed BTC by 6.8%.
Crypto Asset Performance
So, which specific aspects of crypto are poised for outperformance this time around?
One key area to watch is smart contract projects, platforms that will allow users to transact not only information but value and property as well. We believe these platforms and applications will outperform BTC in the next 12-18 months as they compete for users and lay the groundwork for decentralized applications. On the back of the infrastructure developments we have seen in this area in the last few years, new applications are emerging across AI, gaming, and many other areas as tokenization continues to expand.
We also believe that new regulatory progress in 2025 will be more beneficial to these applications than to Bitcoin specifically, because Bitcoin already has regulatory clarity and a well-developed capital markets structure, with the growth of ETFs, options, and futures. In the US and Europe, this legislative and regulatory clarity that will benefit altcoins may include:
• Market structure legislation: Proposals like FIT21 will remove ambiguities regarding the commodity vs. security status of crypto assets, as well as create paths to registration that could boost adoption in the US.
• Stablecoin legislation / MiCA implementation: Both will drive the adoption of stablecoins in the US and Europe, expanding the stablecoin phenomenon beyond just emerging markets.
• Repeal of SAB121: When this obstacle is removed and US banks can hold crypto for their clients, banks and brokerages will increase their crypto trading and custody offerings, which will benefit altcoins the most.
• New ETF launches: With the new SEC chair, there are renewed hopes for additional ETF approvals, including indices and single assets like Solana and XRP. There’s still much uncertainty here, but new assets having ETFs as on-ramps is highly positive.
In addition to Bitcoin developing as an emerging digital store of wealth and smart contract platforms becoming a new way to exchange information, value, and property, there are three other altcoin use cases we believe will benefit in the coming year:
DeFi: Projects aimed at creating an internet-based financial system, running on smart contract platforms, will create a new global capital markets infrastructure for payments, with stablecoins and tokenized money market funds being the first important use cases.
Web3: A new iteration of the internet that will let us own our data and make the internet decentralized and more usable for things like AI agents and other innovations.
Digital Culture: An emerging digital-native generation will have more demand to own digital assets and collectibles, with gaming being a natural first application.
If we compare crypto to the internet, this industry is like the internet in the 1990s and Bitcoin could be compared to email—the only application most people hear about. But fast forward 20 years and while email is still very useful, it has not been the internet’s application that created the most societal value. We believe this could be true for how Bitcoin is currently viewed relative to crypto.
Benefits of diversification
Our team at Hashdex are firm believers that getting broad exposure to this market is necessary to capture the growth we believe we will experience in these other areas. Indices like the Nasdaq Crypto IndexTM (NCITM) can provide broader market exposure and, as crypto matures as an asset class, better risk-adjusted returns. Additionally, indices provide more significant optionality as investors don’t need to rely on an active manager to do this for them. The complexity and fast-evolving nature of crypto make it hard to pick individual winners and an index simplifies investing by offering a balanced, data-driven selection of assets that can align with modern portfolio theory principles.
This is why index ETFs have been at the core of our mission. Accessing crypto through these familiar structures allows investors to benefit from the growth of this asset class with minimal friction. For most investors, we most often recommend a very small allocation to crypto, from 1% to 5%. We strongly believe that a benchmark like the NCITM is an excellent way to “buy the market” and benefit from a strategic allocation into this promising asset class.
[1] The Nasdaq Crypto Index includes Bitcoin, Ethereum, Solana, Ripple, Cardano, Chainlink, Avalanche, Litecoin, Polygon, and Uniswap as of 9/30/24